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Innovation and Growth: The Relationship between Short- and Long-term Properties of Processes of Economic Change

In: New Theories in Growth and Development

Author

Listed:
  • Mario Amendola
  • Jean Luc Gaffard

Abstract

Endogenous growth theory focuses on changes in input—output relations in order to bring to light the endogenous sources of growth. This is so whether an increase in the saving rate and hence in the fraction of output invested is considered, as in the simplest models, or a diversion of resources into R&D so as to speed up the process of innovation is instead taken into account, as in the most sophisticated ones. Different productive structures are required to sustain different growth rates, but the appearance of a productive capacity with a different structure, or the production of a new technology, are not simply the matter of a different input/output relationship: allocation of resources is just the preliminary step of a process through which these changes will be brought about: ‘The hard part is to model what happens then’ (Solow, 1994, p. 52). A shift of resources, which equilibrium models automatically identify with the result that it should bring about, may instead generate a very complex dynamics that can even lead the economy to a collapse.

Suggested Citation

  • Mario Amendola & Jean Luc Gaffard, 1998. "Innovation and Growth: The Relationship between Short- and Long-term Properties of Processes of Economic Change," Palgrave Macmillan Books, in: Fabrizio Coricelli & Massimo di Matteo & Frank Hahn (ed.), New Theories in Growth and Development, chapter 3, pages 50-62, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-26270-0_3
    DOI: 10.1007/978-1-349-26270-0_3
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