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Growth policy in a small, open economy. Domestic innovation and learning from abroad

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Author Info
Brita Bye, Taran Fæhn, and Leo A. Grünfeld () (Statistics Norway)
Abstract

Research and development (R&D) play a pivotal role for innovation and productivity growth, and knowledge spillovers can make the case for public support to private R&D. In small and open economies, absorption of foreign knowledge through exports and imports can be even more decisive for economic growth than domestic innovation. This macro economic analysis investigates how policies should be formed in order to reap the largest productivity effects, when both these sources of growth interplay. In particular, the firms’ capacity to absorb knowledge from abroad depends on domestic R&D, and this reinforces the efficiency arguments for stimulating R&D. We find that from a welfare perspective, export promotion of R&D-based technologies proves slightly more efficient than R&D support.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 572.

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Date of creation: Dec 2008
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Handle: RePEc:ssb:dispap:572

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Related research
Keywords: Absorptive capacity; Computable general equilibrium model; Endogenous growth; Research and Development; Spillovers; Two faces of R&D.;

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  5. Thomas M. Steger, 2005. "Welfare Implications of Non-scale R&D-based Growth Models," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(4), pages 737-757, December. [Downloadable!] (restricted)
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  12. Hwan C. Lin & Benjamin Russo, 2002. "Growth Effects of Capital Income Taxes: How Much Does Endogenous Innovation Matter?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 613-640, October. [Downloadable!] (restricted)
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  15. 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, vol. 101(6), pages 1149-64, December. [Downloadable!] (restricted)
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  17. Charles I. Jones & John C. Williams, . "Too Much of a Good Thing? The Economics of Investment in R&D," Working Papers 95006, Stanford University, Department of Economics.
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  21. Roberto Alvarez & Ricardo Lopez, 2006. "Is Exporting a Source of Productivity Spillovers?," Caepr Working Papers 2006-012, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
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  22. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Blackwell Publishing, vol. 47(4), pages 451-76, December. [Downloadable!] (restricted)
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  23. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March. [Downloadable!] (restricted)
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    Other versions:
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