Scope of Innovations, Knowledge Spillovers and Growth
AbstractThis paper exploits the formalization of a circular product differentiation model of Salop (1979) to propose an endogenous growth quality ladder model in which the knowledge inherent in a given sector can spread variously across the sectors of the economy, ranging from local to global influence. Accordingly, this affects the size of the pool of knowledge in which innovations draw themselves on in order to be produced. Therefore, the law of knowledge accumulation, and thus the growth rate of the economy, depend positively on the expected scope of diffusion of innovations, i.e. on the intensity of knowledge spillovers. This approach generalizes the endogenous growth theory as developed in the seminal models of Grossman & Helpman (1991) and Aghion & Howitt (1992), extending their analysis to the possibility of considering stochastic and partial knowledge spillovers. This framework allows us to mitigate the positive externality of knowledge and thus to apprehend the issue of the funding of research with more parsimony. We characterize the set of steady-state Schumpeterian equilibria as a function of the public tools. We provide an explanation for the fact that research effort can either be suboptimal or over-optimal, depending on the expected scope of knowledge. Accordingly, we find that the optimal public tool dedicated to foster R&D activity depends positively on it.
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Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-161.
Date of creation: Mar 2010
Date of revision:
Schumpeterian growth; scope of diffusion of innovations; knowledge spillovers;
Find related papers by JEL classification:
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-02 (All new papers)
- NEP-CSE-2010-10-02 (Economics of Strategic Management)
- NEP-DGE-2010-10-02 (Dynamic General Equilibrium)
- NEP-INO-2010-10-02 (Innovation)
- NEP-KNM-2010-10-02 (Knowledge Management & Knowledge Economy)
- NEP-URE-2010-10-02 (Urban & Real Estate Economics)
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