Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Schumpeterian Growth Model with Heterogenous Firms

Contents:

Author Info

  • Minniti, A.
  • Parello, C.
  • Segerstrom, P. S.

Abstract

A common assumption in the Schumpeterian growth literature is that the innovation size is constant and identical across industries. This is in contrast with the empirical evidence which shows that: (i) the innovation size is far from being identical across industries; and (ii) the size distribution of profit returns from innovation is highly skewed toward the low value side, with a long tail on the high value side. In the present paper, we develop a Schumpeterian growth model that is consistent with this evidence. In particular, we assume that when a firm innovates, the size of its quality improvement is the result of a random draw from a Pareto distribution. This enables us to extend the class of quality-ladder growth models to encompass firm heterogeneity. We study the policy implications of this new set-up numerically and find that it is optimal to heavily subsidize R&D for plausible parameter values. Although it is optimal to tax R&D for some parameter values, this case only occurs when the steady-state rate of economic growth is very low.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/13674/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13674.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:pra:mprapa:13674

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Schumpeterian Growth; R&D; optimal policy;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Chol-Won Li, 1998. "Endogenous Growth Without Scale Effects: Comment," Working Papers, Business School - Economics, University of Glasgow 9819, Business School - Economics, University of Glasgow.
  2. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, Econometric Society, vol. 65(6), pages 1389-1420, November.
  3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, Econometric Society, vol. 71(6), pages 1695-1725, November.
  4. Charles I. Jones & John C. Williams, . "Too Much of a Good Thing? The Economics of Investment in R&D," Working Papers, Stanford University, Department of Economics 96005, Stanford University, Department of Economics.
  5. Silverberg,Gerald & Verspagen,Bart, 2004. "The size distribution of innovations revisited: an application of extreme value statistics to citation and value measures of patent significance," Research Memorandum 021, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 323-51, March.
  7. Norrbin, Stefan C, 1993. "The Relation between Price and Marginal Cost in U.S. Industry: A Contradiction," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(6), pages 1149-64, December.
  8. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
  9. Benjamin Bental & Dan Peled, 2002. "Quantitative growth effects of subsidies in a search theoretic R&D model," Journal of Evolutionary Economics, Springer, vol. 12(4), pages 397-423.
  10. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2000. "Market Value and Patent Citations: A First Look," NBER Working Papers 7741, National Bureau of Economic Research, Inc.
  11. Joonkyung Ha & Peter Howitt, 2007. "Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 39(4), pages 733-774, 06.
  12. Li, Chol-Won, 2001. "On the Policy Implications of Endogenous Technological Progress," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(471), pages C164-79, May.
  13. repec:ebl:ecbull:v:15:y:2003:i:4:p:1-8 is not listed on IDEAS
  14. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
  15. Segerstrom, Paul S., 1999. "Intel Economics," Working Paper Series, Research Institute of Industrial Economics 524, Research Institute of Industrial Economics.
    • Paul S. Segerstrom, 2007. "Intel Economics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 247-280, 02.
  16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  17. Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier.
  18. Susanto Basu, 1995. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," NBER Working Papers 5336, National Bureau of Economic Research, Inc.
  19. Scherer, Frederic M. & Harhoff, Dietmar & Vopel, Katrin, 1997. "Exploring the Tail of Patented Invention Value Distributions," ZEW Discussion Papers 97-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  20. O'Donoghue, Ted & Zweimüller, Josef, 1998. "Patents in a Model of Endogenous Growth," Economics Series 56, Institute for Advanced Studies.
  21. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  22. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
  23. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
  24. Thompson, Peter & Waldo, Doug, 1994. "Growth and trustified capitalism," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(3), pages 445-462, December.
  25. Thompson, Peter, 1999. "Rationality, rules of thumb, and R&D," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 10(3-4), pages 321-340, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 43, July.
  2. Paolo Giordani & Luca Zamparelli, 2011. "On robust asymmetric equilibria in asymmetric R&D-driven growth economies," Decisions in Economics and Finance, Springer, vol. 34(1), pages 67-84, May.
  3. Cevikarslan, Salih, 2013. "Heterogeneity in innovation strategies, evolving consumer preferences and market structure: An evolutionary multi-agent based modelling approach," MERIT Working Papers 019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Cevikarslan, Salih, 2013. "Optimal patent length and patent breadth in an R&D driven market with evolving consumer preferences: An evolutionary multi-agent based modelling approach," MERIT Working Papers 020, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  5. Venturini, Francesco, 2012. "Looking into the black box of Schumpeterian growth theories: An empirical assessment of R&D races," European Economic Review, Elsevier, vol. 56(8), pages 1530-1545.
  6. Stadler, Manfred, 2012. "Engines of growth: Education and innovation," University of Tuebingen Working Papers in Economics and Finance 40, University of Tuebingen, Faculty of Economics and Social Sciences.
  7. Vincenzo Denicolò & Piercarlo Zanchettin, 2010. "Leadership Cycles," Working Papers 2010.35, Fondazione Eni Enrico Mattei.
  8. Viktor Slavtchev & Simon Wiederhold, 2011. "The Impact of Government Procurement Composition on Private R&D Activities," Jena Economic Research Papers 2011-036, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  9. Simon Wiederhold, 2009. "Government Spending Composition in a Simple Model of Schumpeterian Growth," Jena Economic Research Papers 2009-101, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:13674. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.