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Profitable Unproductive Innovations

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Abstract

The present paper studies resource allocation in an expanding product variety framework à la Romer (1990). We consider the limiting case where net returns to specialization are zero and, therefore, R&D is completely useless, socially. Nevertheless, the market equilibrium involves allocation of ressources to R&D, and this wasteful allocation may take place even in a steady state.

Suggested Citation

  • María J. Alvarez-Peláez & Christian Groth, 2003. "Profitable Unproductive Innovations," Economic Working Papers at Centro de Estudios Andaluces E2003/42, Centro de Estudios Andaluces.
    • Handle: RePEc:cea:doctra:e2003_42
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    References listed on IDEAS

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    1. de Groot, Henri L. F. & Nahuis, Richard, 1998. "Taste for diversity and the optimality of economic growth," Economics Letters, Elsevier, vol. 58(3), pages 291-295, March.
    2. Alvarez-Pelaez, Maria J. & Groth, Christian, 2005. "Too little or too much R&D?," European Economic Review, Elsevier, vol. 49(2), pages 437-456, February.
    3. Benassy, Jean-Pascal, 1998. "Is there always too little research in endogenous growth with expanding product variety?," European Economic Review, Elsevier, vol. 42(1), pages 61-69, January.
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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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