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Too Much of a Good Thing? The Quantitative Economics of R&D-driven Growth Revisited

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  • Holger Strulik

Abstract

This article augments an R&D-based growth model of the third generation with human capital accumulation and impure altruism, calibrates it with U.S. data, and investigates whether the market provides too little or too much R&D. For benchmark parameters, the market share of employment in R&D is close to the socially optimal solution. Sensitivity analysis shows that the order of magnitude of possible deviation between market R&D and optimal R&D is also smaller than suggested by previous studies. Small deviation of total research effort, however, can be compatible with large sectoral misallocations. Furthermore, the model allows for two additional channels through which population growth may affect the resource allocation so that its overall economic impact is no longer predetermined as positive. Numerical calibrations show that economic growth at the average rate in the U.S. over the last century can be consistent with a small and probably negative partial correlation between population growth and economic growth. Copyright The editors of the "Scandinavian Journal of Economics" 2007 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 109 (2007)
Issue (Month): 2 (06)
Pages: 369-386

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Handle: RePEc:bla:scandj:v:109:y:2007:i:2:p:369-386

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  1. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, May.
  2. Charles I. Jones & John C. Williams, 1999. "Too Much of a Good Thing? The Economics of Investment in R&D"," Working Papers 99015, Stanford University, Department of Economics.
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  6. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  7. Diego Comin, 2003. "R&D? A Small Contribution to Productivity Growth," Macroeconomics 0306007, EconWPA.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  10. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
  11. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
  12. Charles I. Jones, . "Growth: With or Without Scale Effects?," Working Papers 99001, Stanford University, Department of Economics.
  13. Laitner, John & Ohlsson, Henry, 2001. "Bequest motives: a comparison of Sweden and the United States," Journal of Public Economics, Elsevier, vol. 79(1), pages 205-236, January.
  14. Charles I. Jones & John C. Williams, . "Measuring the Social Return to R&D," Working Papers 97002, Stanford University, Department of Economics.
  15. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  16. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  17. Thomas M. Steger, 2005. "Welfare Implications of Non-scale R&D-based Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 737-757, December.
  18. Peretto, Pietro F, 1998. " Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
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Cited by:
  1. Grossmann, Volker & Steger, Thomas M. & Trimborn, Timo, 2010. "Quantifying Optimal Growth Policy," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-440, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  2. Grossmann, Volker & Steger, Thomas M. & Trimborn, Timo, 2010. "Dynamically Optimal R\& D Subsidization," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-453, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  3. Volker Grossmann, 2013. "Structural Change, Urban Congestion, and the End of Growth," Review of Development Economics, Wiley Blackwell, vol. 17(2), pages 165-181, 05.
  4. Grossmann, Volker, 2008. "Entrepreneurial Innovation and Sustained Long-Run Growth without Weak or Strong Scale Effects," IZA Discussion Papers 3389, Institute for the Study of Labor (IZA).
  5. Sochirca, Elena & Gil, Pedro Mazeda & Afonso, Oscar, 2014. "Technology structure and skill structure: Costly investment and complementarity effects quantification," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 172-189.
  6. Long Xin & Pelloni Alessandra, 2011. "Welfare improving taxation on savings in a growth model," wp.comunite 0091, Department of Communication, University of Teramo.
  7. Pedro Gil & Fernanda Figueiredo, 2013. "Firm size distribution under horizontal and vertical innovation," Journal of Evolutionary Economics, Springer, vol. 23(1), pages 129-161, January.
  8. Sochirca, Elena & Afonso, Óscar & Gil, Pedro Mazeda, 2013. "Technological-knowledge bias and the industrial structure under costly investment and complementarities," Economic Modelling, Elsevier, vol. 32(C), pages 440-451.

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