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Use costs in a two-R&D-sector model

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  • Giulio, NICOLETTI

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

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    Abstract

    In this paper we assess the properties of scale-free endogenous growth models in presence of use costs for the final users. As bench-mark we use Segerstrom (2000) two R&D sector model. When use costs apply to both types of innovation we find counterintuitive results with respect to the standard Endogenous Growth literature ; use costs can increase growth. This is due to the presence of both increasing returns in the research functions and the population growth condition. When costs apply to vertical innovations only we can establish more intuitive results : under mild conditions use costs decrease the rate of vertical innovation and of overall economic growth.

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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2003-23.pdf
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    Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2003023.

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    Length: 24
    Date of creation: 01 Nov 2003
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    Handle: RePEc:ctl:louvir:2003023

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    Keywords: Endogenous Growth; Scale effect; Adoption costs;

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    1. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    2. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
    3. Boyan Jovanovic, 1995. "Learning and Growth," NBER Working Papers 5383, National Bureau of Economic Research, Inc.
    4. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    5. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
    6. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
    7. 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.
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