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Coordination Frictions and Economic Growth

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  • Miroslav Gabrovski

Abstract

In practice, firms face a mass of scarce innovation projects. They choose a particular research avenue towards which to direct their effort, but do not coordinate these choices. This gives rise to coordination frictions. This paper develops an expanding-variety endogenous growth model to study the impact of these frictions on the economy. The coordination failure generates a mass of foregone innovation and reduces the economy-wide research intensity. Both of these effects decrease the growth rate. Because of this, the frictions also amplify the fraction of wasteful simultaneous innovation. A numerical exercise suggests that the impact of coordination frictions on both the growth rate and welfare is substantial.

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  • Miroslav Gabrovski, 2017. "Coordination Frictions and Economic Growth," 2017 Papers pga928, Job Market Papers.
    • Handle: RePEc:jmp:jm2017:pga928
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    Cited by:

    1. Miroslav Gabrovski, 2020. "Simultaneous Innovation and the Cyclicality of R&D," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 122-133, April.

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    More about this item

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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