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Too Much of a Good Thing? The Quantitative Economics of R&D–driven Growth Revisited

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  • Holger Strulik

    (Department of Economics, University of Copenhagen)

Abstract

This paper augments an R&D-based growth model of the third generation with human capital accumulation and impure altruism, calibrates it with U.S. data, and investigates whether the market provides too little or too much R&D. For benchmark parameters the market share of employment in R&D is close to the socially optimal allocation. Sensitivity analysis shows that the order of magnitude of possible deviation between market allocation and optimal R&D is also smaller than suggested by previous studies. Furthermore, the model allows for two additional channels through which population growth may affect the resource allocation so that its overall economic impact is no longer predetermined as being positive. Numerical calibrations show that economic growth at the U.S. average rate during the last century can be consistent with a small and probably negative partial correlation between population growth and economic growth.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 05-26.

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Length: 15 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:kud:kuiedp:0526

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Related research

Keywords: human capital; population growth; endogenous economic growth; R&D-spillovers;

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References

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  1. Laitner, J. & Ohlsson, H., 1998. "Bequest Motives: a Comparison of Sweden and the United States," Papers 1998:16, Uppsala - Working Paper Series.
  2. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
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  5. Peretto, Pietro F, 1998. " Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
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  7. Charles I. Jones & John C. Williams, 1999. "Too Much of a Good Thing? The Economics of Investment in R&D"," Working Papers 99015, Stanford University, Department of Economics.
  8. Thomas M. Steger, 2005. "Welfare Implications of Non-scale R&D-based Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 737-757, December.
  9. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-66, December.
  10. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  11. Charles I. Jones & John C. Williams, . "Measuring the Social Return to R&D," Working Papers 97002, Stanford University, Department of Economics.
  12. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1982. "Population size and the social welfare functions of Bentham and Mill," Economics Letters, Elsevier, vol. 10(1-2), pages 61-64.
  13. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
  14. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  15. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
  16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  17. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  18. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
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Cited by:
  1. Volker Grossmann & Thomas M. Steger & Timo Trimborn, 2010. "Quantifying Optimal Growth Policy," DEGIT Conference Papers c015_051, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Long Xin & Pelloni Alessandra, 2011. "Welfare improving taxation on savings in a growth model," wp.comunite 0091, Department of Communication, University of Teramo.
  3. Sochirca, Elena & Afonso, Óscar & Gil, Pedro Mazeda, 2013. "Technological-knowledge bias and the industrial structure under costly investment and complementarities," Economic Modelling, Elsevier, vol. 32(C), pages 440-451.
  4. Volker Grossmann, 2008. "Entrepreneurial Innovation and Sustained Long-run Growth without Weak or Strong Scale Effects," CESifo Working Paper Series 2264, CESifo Group Munich.
  5. Volker Grossmann, 2011. "Structural Change, Urban Congestion, and the End of Growth," DEGIT Conference Papers c016_005, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Grossmann, Volker & Steger, Thomas & Trimborn, Timo, 2013. "Dynamically optimal R&D subsidization," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 516-534.
  7. Pedro Gil & Fernanda Figueiredo, 2013. "Firm size distribution under horizontal and vertical innovation," Journal of Evolutionary Economics, Springer, vol. 23(1), pages 129-161, January.

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