Baptiste Boitier, Paul Zagamé, Nicolas Lancesseur, Boris Le Hir and Pierre Le Mouël (SEURECO) Brussels – 16/12/15 FLAGSHIP Final event Knowledge policies for Perseverance and Metamorphosis scenarios FLAGSHIP is Funded by the 7 th Framework Programme of the European Union Thinking ahead sustainably: Policies, Scenarios and Models to address Grand Societal Challenges

Content I.Why and How knowledge policies? II.Perseverance: R&D policies for innovation and growth III.Metamorphosis: Innovation policies for more inclusive growth IV.Knowledge policies beyond science and conscience V.Concluding remarks 2

I.Why and How knowledge policies 1.Why knowledge policies? Breaking down on innovation, productivity and growth Need for increase the productivity in services: health services (ageing) and other services Energy efficiency and resources availability 3

I.Why and How knowledge policies 2.How knowledge policies? The way the knowledge policies are implemented depends on the reference scenario Perseverance: knowledge policy for science, innovation, productivity and growth Metamorphosis (1): knowledge policy for science, innovation and inclusive growth Metamorphosis (2): knowledge policy beyond science, for awareness and conscience 4

I.Why and How knowledge policies 2.How knowledge policies? Perseverance scenario The traditional objective: competitiveness and growth R&D policies: National Action Plans for R&D, increase the R&D intensity of 30% (0,6pt of GDP) for the European Union, with heterogeneity between member states, from none effort (Denmark) to +300% in Romania (1,5pt of GDP) 5

I.Why and How knowledge policies 2.How knowledge policies? Metamorphosis scenario a) Knowledge policies with R&D, other intangibles and ICT for inclusive growth Circular economy and resource revolution claim for more radical breakthrough policies Optimisation and virtualisation of process need a development of ICT (and other intangibles) Enhance productivity in services Concerns of inequalities 6

I.Why and How knowledge policies 2.How knowledge policies? Metamorphosis scenario b) Knowledge beyond science for awareness and conscience Social cohesion Ethical values Environmental awareness  Policies for changing value system: Education and training Awareness campaign Civil society supports etc. 7

II.Perseverance: R&D policies for innovation and growth Europe 2020 NAP (R&D only) 8

II.Perseverance: R&D policies for innovation and growth Europe 2020 NAP (R&D only) 9 Heterogeneous effort among member states 33% of the effort devote to public R&D (financed by lump sum tax on households’ disposable income) 66% to private R&D (financed directly by firms)

II.Perseverance: R&D policies for innovation and growth Europe 2020 NAP (only R&D) 10 Figure displays the gains in annual GDP growth by member state due to the implementation of the Perseverance innovation policy In average the EU GDP growth is 0,1% between 2015 and 2050 With a maximum of 0,32% in Portugal

III.Metamorphosis: Innovation policies for more inclusive growth Europe 2020 NAP (all innovative inputs) 11 Optimal allocation of innovative inputs (with the help of the NEMESIS new innovation module) At EU level, 25% on Private R&D, 12% in public R&D, 23% in ICT and 40% in other intangibles

III.Metamorphosis: Innovation policies for more inclusive growth Europe 2020 NAP (all innovative inputs) 12 In EU, the average gain of GDP growth is of 0,12% i.e. slightly higher than in the previous case (through distribution effect) With a maximum in Romania of 0,52% (in average between 2015 and 2050)

III.Metamorphosis: Innovation policies for more inclusive growth Europe 2020 NAP (all innovative inputs) 13 Innovation policy targeting all innovative input is slightly more efficient in terms of GDP gains (in EU) But it is much more efficient in less advanced EU countries (more inclusive)

III.Metamorphosis: Innovation policies for more inclusive growth Europe 2020 NAP (all innovative inputs) 14 R&D favours sectors exposed to international competition Whereas, ICT and other intangibles are more performant to boost labour productivity into services sectors (less exposed)

IV.Knowledge policies beyond science for awareness and conscience Changing system of value = changing utility functions Extended objective functions to other variables than profit for firms Deformation and/or extension of utility functions for consumers In the NEMESIS model, the utility deformation of consumer is identical to budgetary coefficients variation at constant prices 15

IV.Knowledge policies beyond science for awareness and conscience At first, normative: if the utility were modified in a bias favourable to environment and well being what would be the benefit? Normative bias by continuous changing of budgetary coefficients 16

IV.Knowledge policies beyond science for awareness and conscience Change of households’ consumption functions (EU level, in 2050) 17 Strong reduction of energy consumption Reduction of goods and increase of services expenditures Substitution of individual transport to public transports Significant increase in communication and leisure activities

IV.Knowledge policies beyond science for awareness and conscience Without neither price incentive nor other additional policies, modification of value system allow a spontaneous move towards objectives linked with Grand Societal Challenges: Ageing Environment Energy efficiency dematerialisation 18

IV.Knowledge policies beyond science for awareness and conscience Is this evolution of the value system an utopia? Recent works (Lancesseur, 2015) based on upmost econometric methods (Kalman filter with panel data) show that on past data deformation of utility functions were more important than our hypothesis (9,9% against 11,3%) We are more virtuous and that could be a catalyst for others policies (and especially market based policies) 19

V.Concluding remarks Innovation policies are an essential element to overcome economic Grand Societal Challenges in EU But, there are several possibilities: Continuation of R&D supports policies, essential for competitiveness and products innovation in the tradable sectors But, combining this innovation policy with supports to other intangible and ICT investments: Does not penalise the global economic performance of the policy And it enhances the inclusiveness of the innovation policies by raising efficiency of the policies in less advanced economies (favours “use spillovers” and productivity in the services sectors) And it creates more employment for low-skilled workers (generally, the ones the most penalised by technological change) 20

V.Concluding remarks Difficulty to reach objectives linked to Grand Societal Challenges without a breakthrough on behaviour This breakthrough has already begun: some reasons of this beginning are well known, other are not already discovered Recommendations: To emphasise the policies that influence behaviours: education, training, etc. To deepen the research on the cause of behaviour modifications in link with the new behavioural economics Later on to transform these last results in policy recommendations 21

Thank you for your attention! baptiste.boitier{a}erasme-team.eu paul.zagame{a}erasme-team.eu SEURECO FLAGSHIP is Funded by the 7 th Framework Programme of the European Union