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Institutions, Innovation And Economic Growth

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  • Edinaldo Tebaldi

    ()
    (Department of Economics, Bryant University)

  • Bruce Elmslie

    ()
    (Department of Economics, University of New Hampshire)

Abstract

This article contributes to the growth literature by developing a formal growth model that provides the basis for studying institutions and technological innovation and examining how human capital and institutional constraints affect the transitional and steady state growth rates of output. The model developed in this article shows that the reason that growth models a la Romer (1990) generate endogenous growth is the use of a set of restrictive and unrealistic assumptions regarding the role of institutions in the economy. The baseline model developed in this article shows that the long-run growth of the economy is intrinsically linked to institutions and suggests that an economy with institutions that retard or prevent the utilization of newly invented inputs will experience low levels and low growth rates of output. The model also predicts that countries with institutional barriers that prevent or restrict the adoption of newly invented technologies will allocate a relative small share of human capital in the R&D sector. Moreover, both the baseline and the extended version of the model suggest that sustainable growth in human capital, not an increase in the stock of human capital, generates a growth effect.

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Bibliographic Info

Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 33 (2008)
Issue (Month): 2 (December)
Pages: 27-53

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Handle: RePEc:jed:journl:v:33:y:2008:i:2:p:27-53

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Related research

Keywords: Institutions; Innovation; Human Capital; Economic Growth;

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References

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  1. Xavier Sala-i-Martin, 2002. "15 Years of New Growth Economics : What Have we Learnt?," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(2), pages 5-15, August.
  2. Baldwin, John & Lin, Zhengxi, 2002. "Impediments to advanced technology adoption for Canadian manufacturers," Research Policy, Elsevier, vol. 31(1), pages 1-18, January.
  3. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," CEPR Discussion Papers 4458, C.E.P.R. Discussion Papers.
  4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
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  7. Jeffrey D. Sachs, 2000. "Tropical Underdevelopment," CID Working Papers 57, Center for International Development at Harvard University.
  8. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  9. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  10. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  11. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  12. Gradstein, Mark, 2002. "Rules, stability, and growth," Journal of Development Economics, Elsevier, vol. 67(2), pages 471-484, April.
  13. Johannes Fedderke, 2001. "Growth and institutions," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 645-670.
  14. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  15. Justus Haucap & Christian Wey, 2004. "Unionisation Structures and Innovation Incentives," Discussion Papers of DIW Berlin 398, DIW Berlin, German Institute for Economic Research.
  16. Chenggang Xu & Haizhou Huang, 1999. "Institutions, Innovations, and Growth," IMF Working Papers 99/34, International Monetary Fund.
  17. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers.
  18. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  19. Gradstein, Mark, 2004. "Governance and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 505-518, April.
  20. 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.
  21. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  22. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
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Citations

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Cited by:
  1. Dias, Joilson & Tebaldi, Edinaldo, 2012. "Institutions, human capital, and growth: The institutional mechanism," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 300-312.
  2. Vito Pipitone & Luciano Seta, 2012. "The Conditional Convergence in TFP Levels. On the Relationship between TFP, Processes of Accumulation and Institutions," Working Papers - Economics wp2012_09.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  3. Kezia De Lucas Bondezan & Joilson Dias, 2014. "Crescimento Econômico De Longo Prazo No Brasil: Uma Abordagem Sobre O Da Acumulação De Capital E Das Instituições," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 096, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  4. Garcia-Murillo, Martha & Velez-Ospina, Jorge Andres & Vargas-Leon, Patricia, 2012. "Where should governments invest? The impact of economic, political, social and technological factors on the formation of new firms," 23rd European Regional ITS Conference, Vienna 2012 60400, International Telecommunications Society (ITS).
  5. Paul, Bénédique, 2012. "Technology and institutions: Theoretical aspects of institutional innovation and its deficiency in Haiti," MPRA Paper 39140, University Library of Munich, Germany.
  6. Michael Lobsiger & Marc Zahner, 2012. "Institutions And Economic Development: Disentangling The Role Of Contracting And Property Rights Institutions," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(2), pages 1-34, June.
  7. Jorge Andrés Vélez Ospina, 2009. "Determinantes de la inversión en innovación en el sector de Bogotá:estimaciones econométricas a nivel de la firma," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  8. Ugur, Mehmet & Dasgupta, Nandini, 2011. "Corruption and economic growth: A meta-analysis of the evidence on low-income countries and beyond," MPRA Paper 31226, University Library of Munich, Germany, revised 31 May 2011.

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