1. This project is co-funded by the European Union
I3U “Investigating the Impact of the Innovation Union“ Kick off meeting - 10 March Boris Le Hir, Pierre Le Mouël, Paul Zagamé
Venue: ISIS – Institute of Studies for the Integration of Systems
Largo dei Lombardi, 4
00186 Rome, Italy
This project is co-funded by the European Union

2. Overview of the project
SEURECO: Mainly WP10 macro-sectoral economic modelling
Dependante on WP9 European Innovation System
Involved more lightly in WP1-WP8

3. Overview of the project

4. The sensitive mechanisms of NEMESIS to implementations of commitments
Sensitive parameters for the innovation mechanisms
R&D and other innovative assets decision
Knowledge spillovers
Performance of knowledge and other innovative assets
Macroeconomic feedbacks
Goods and Services markets
Labour market – supply of high skilled
Financing of innovative assets
Lags: three periods for macrodynamics

5. I.1) R&D and other innovative assets decision
In principle: endogenously calculated by model:
Max value of firms NEMESIS
But this is too simple and mechanical:
Role of risk? Of institution? The econometric works show that the source and the way of financing matters a lot on R&D decision
The role of other policies IU

6. I.1) R&D and other innovative assets decision
What is important here is that all measures that modify the productivity of research either directly or indirectly (for instance by enhancing spillovers) will modify innovation decision
For all these reasons, the endogenous innovation decision is very often “disconnected” and introduced exogenously in the model:
Either based on results of econometric studies: Hall and Tool (2000); Van Pottelsberghe (2003); Aerts and Schmidt (2009);
Or based on experts groups: ERA (2014) for instance
The organization of research is very important for instance for an European action that enhances spillovers and transfer of best practices the additionallity is more important (cf ERA, FP, H2020)
The origin of incentive is also important

7. I.2) Knowledge spillovers
Intersectoral and international spillovers
The evaluation of these spillovers had been improved by DEMETER project (Meijers and Verspagen 2010)
The primary mechanism for assessing technology (or knowledge) flows are patent citations from EPO and USPTO
The main idea is that cited sends a piece of knowledge to the citing patent and that each patent can be assigned to a sector and a country
The result is a square matrix with country-sector combinations in the rows and columns
How commitments achievement modify these spillovers?

8. I.3) Performance of knowledge
Fully endogenous module:
Aghion Howitt (1998); Ha Howitt (2005) etc.
Long term rate of growth of productivity depends on the research intensity R/Y and other innovative assets intensity (Other intangible and ICT)
Calibration use econometric works: Hall Mairesse Mohnen (2009)
Rate of growth of the economy depends on macroeconomic feedbacks

9. II) Macro economic feedbacks

10. II.1) Goods and Services Markets
At the end, the internal demand and competitiveness will be enhanced by:
Process innovation (price decrease)
Product innovation (quality for NEMESIS)
All that enhances these effects will induce an increase of macroeconomic performance (structure of market, harmonization)
All that jeopardizes these effects will induce a diminution of macroeconomic performance. It is the case for “inflationary pressures”. Several mechanisms can be at the origin of inflationary pressures; but two are more important:
Labour market and especially for high skilled
Financing of R&D expenditures

11. II.2) Labour market
Supply of high skilled workers for research and innovation:
If too much rigidity inefficiencyof research and innovation policy
To link this elasticity of supply to commitments

12. II.3) Finance
The way tof financing R&D and Innovation is important for the results (sentivity test with NEMESIS)
The main parameters:
The access to finance
The sharing of finance
The risk of finance

13. II.4) Lags From incentive to assets for innovation
From assets to innovation
From innovation to economic performance

14. III) Interaction with other WP
1 Decision on Innovation Inputs
2 Spillovers
1+2 Production of Innovation
3 Economic performances
of innovation
4 G&S market
5 Labour market
Needs for Modification of NEMESIS
Exogeneous variables
Parameters
Behavioural equations
Com. 1
Increase the supply of High skill of X%
Yes No ⁞
Com. z
Decrease the cost of R&D of R%
Increase R&D investment of Z%
Com. n
Increase spillovers in Europe of N%

15. III) Interaction with other WP
The role of European Innovation System
To transfer the 34 Commitments
In fewer entries for NEMESIS
Quasi exhaustible on the information
Avoiding overlapping and rigidities

16. Thank you
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