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Rising R&D Intensity and Economic Growth

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  • Andreas Pollak

Abstract

Over the past decades, private R&D spending in the US and other developed countries has been growing faster than GDP. In the United States, for example, R&D expenditures (excluding those funded by the federal government) have grown from 0.63% of GDP in 1953 to 1.95% of GDP in 2007, i.e. R&D intensity has increased by more than a factor of three in half a century. At the same time, the growth rates of per capita and aggregate output have been rather stable, possibly declining slightly. Standard models of endogenous growth and R&D cannot easily reproduce or explain this observation, not even along a transition path. This paper proposes a growth model that can account for the observed phenomenon by explicitly describing competition among technological leaders and followers in individual markets in a way that is consistent with existing studies on firms’ motivation to invest in R&D. The model shows that it is possible that the eventually unsustainable trend of rising R&D intensity persists for a very long time.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_057.

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Length: 37 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:deg:conpap:c015_057

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Keywords: Endogenous Growth; Research & Development; Market Structure;

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  1. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  2. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 41-63, February.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  4. Vincenzo Denicol� & Piercarlo Zanchettin, 2010. "Competition, Market Selection and Growth," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 120(545), pages 761-785, 06.
  5. Mihaela Iulia Pintea & Peter Thompson, 2007. "Technological Complexity and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(2), pages 276-293, April.
  6. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1290-1310, December.
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