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The Dynamics of Knowledge Diversity and Economic Growth

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Author Info
Berliant, Marcus
Fujita, Masahisa

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Abstract

How is long run economic growth related to the diversity of knowledge? We formulate and study a microeconomic model of knowledge creation, through the interactions among a group of R & D workers, embedded in a growth model to address this question. Income to these workers accrues as patent income, whereas transmission of newly created knowledge to all such workers occurs due to public transmission of patent information. Our model incorporates two key aspects of the cooperative process of knowledge creation: (i) heterogeneity of people in their state of knowledge is essential for successful cooperation in the joint creation of new ideas, while (ii) the very process of cooperative knowledge creation affects the heterogeneity of people through the accumulation of knowledge in common. The model features myopic R & D workers in a pure externality model of interaction. Surprisingly, in the general case for a large set of initial conditions we find that the equilibrium process of knowledge creation converges to the most productive state, where the population splits into smaller groups of optimal size; close interaction takes place within each group only. Equilibrium paths are found analytically. Long run economic growth is positively related to both the effectiveness of pairwise R & D worker interaction and to the effectiveness of public knowledge transmission.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7088.

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Date of creation: 09 Feb 2008
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Handle: RePEc:pra:mprapa:7088

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Related research
Keywords: knowledge creation knowledge externalities microfoundations of endogenous growth knowledge diversity and growth

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Find related papers by JEL classification:
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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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.:
  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October. [Downloadable!] (restricted)
  3. Marcus Berliant & Masahisa Fujita, 2004. "Knowledge Creation as a Square Dance on the Hilbert Cube," Game Theory and Information 0401004, EconWPA, revised 27 Jan 2004. [Downloadable!]
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  4. Helsley, Robert W. & Strange, William C., 2004. "Knowledge barter in cities," Journal of Urban Economics, Elsevier, vol. 56(2), pages 327-345, September. [Downloadable!] (restricted)
  5. G Duranton & D Puga, 2000. "Nursery Cities: Urban Diversity, Process Innovation and the Life-Cycle of Products," CEP Discussion Papers 0445, Centre for Economic Performance, LSE. [Downloadable!]
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  6. Marcus Berliant & Robert R. Reed III & Ping Wang, 2004. "Knowledge Exchange, Matching, and Agglomeration," Urban/Regional 0405007, EconWPA, revised 03 Dec 2004. [Downloadable!]
    Other versions:
  7. Christian Ghiglino, 2005. "Balanced Growth with a Network of Ideas," Working Papers 546, Queen Mary, University of London, Department of Economics. [Downloadable!]
  8. Jovanovic, Boyan & Rob, Rafael, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Blackwell Publishing, vol. 56(4), pages 569-82, October. [Downloadable!] (restricted)
  9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  10. Ola Olsson, 2005. "Technological Opportunity and Growth," Journal of Economic Growth, Springer, vol. 10(1), pages 31-53, 01. [Downloadable!] (restricted)
  11. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
    Other versions:
  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
    Other versions:
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