IDEAS home Printed from https://ideas.repec.org/p/vie/viennp/vie0609.html
   My bibliography  Save this paper

Quality-improving horizontal innovations

Author

Abstract

We modify the growth model with horizontal innovations from Romer (1990) and Jones (1995) by assuming that researchers can determine the quality of the products they invent. Because research effort increases with product quality, the researchers face a tradeoff between the quantity and the quality of their innovations. We show (i) that every product is slowly but steadily driven out of the market by superior goods, (ii) that the model does not exhibit a strong scale effect, (iii) that the long-run growth rate of the economy is not policy-invariant but can be controlled by quality-contingent R&D subsidies, and (iv) that the optimal solution can be decentralized using a mix of production subsidies, R&D subsidies, and lump-sum taxation.

Suggested Citation

  • Gerhard Sorger, 2006. "Quality-improving horizontal innovations," Vienna Economics Papers vie0609, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie0609
    as

    Download full text from publisher

    File URL: https://papersecon.univie.ac.at/RePEc/vie/viennp/vie0609.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    2. Benassy, Jean-Pascal, 1998. "Is there always too little research in endogenous growth with expanding product variety?," European Economic Review, Elsevier, vol. 42(1), pages 61-69, January.
    3. 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.
    4. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    5. Charles I. Jones, 2002. "Sources of U.S. Economic Growth in a World of Ideas," American Economic Review, American Economic Association, vol. 92(1), pages 220-239, March.
    6. Alvarez-Pelaez, Maria J. & Groth, Christian, 2005. "Too little or too much R&D?," European Economic Review, Elsevier, vol. 49(2), pages 437-456, February.
    7. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1119-1135.
    8. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    9. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170, Elsevier.
    10. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    11. Aghion, Philippe & Howitt, Peter, 2005. "Growth with Quality-Improving Innovations: An Integrated Framework," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 2, pages 67-110, Elsevier.
    12. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    13. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
    14. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-335, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gerhard Sorger, 2006. "Quality-improving horizontal innovations," Vienna Economics Papers 0609, University of Vienna, Department of Economics.
    2. Sener, Fuat, 2008. "R&D policies, endogenous growth and scale effects," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3895-3916, December.
    3. Dean Scrimgeour, 2015. "Dynamic Scoring in a Romer‐Style Economy," Southern Economic Journal, John Wiley & Sons, vol. 81(3), pages 697-723, January.
    4. Gray, Elie & Grimaud, André, 2014. "The Lindahl equilibrium in Schumpeterian growth models: Knowledge diffusion, social value of innovations and optimal R&D incentives," TSE Working Papers 14-469, Toulouse School of Economics (TSE).
    5. Elie Gray & André Grimaud, 2016. "The Lindahl equilibrium in Schumpeterian growth models," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 101-142, March.
    6. Gray, Elie & Grimaud, André, 2014. "The Lindahl equilibrium in Schumpeterian growth models: Knowledge diffusion, social value of innovations and optimal R&D incentives," IDEI Working Papers 821, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Elie Gray & André Grimaud, 2014. "The Lindahl Equilibrium in Schumpeterian Growth Models: Knowledge Diffusion, Social Value of Innovations and Optimal R&D Incentives," CESifo Working Paper Series 4678, CESifo.
    8. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    9. Dean Scrimgeour, 2015. "Dynamic Scoring in a Romer-Style Economy," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 697-723, January.
    10. repec:wly:soecon:v:81:3:y:2015:p:697-723 is not listed on IDEAS
    11. Richard M. H. Suen, 2013. "Research Policy and U.S. Economic Growth," Working papers 2013-18, University of Connecticut, Department of Economics.
    12. Volker Grossmann & Thomas Steger, 2007. "Growth, Development, and Technological Change," CESifo Working Paper Series 1913, CESifo.
    13. Cozzi, Guido & Galli, Silvia, 2011. "Privatization of Knowledge: Did the U.S. Get It Right? (New Version)," MPRA Paper 29710, University Library of Munich, Germany.
    14. Alberto Bucci, 2014. "Population, competition, innovation, and economic growth with and without human capital investment," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(1), pages 61-84, April.
    15. Minniti, Antonio & Venturini, Francesco, 2017. "The long-run growth effects of R&D policy," Research Policy, Elsevier, vol. 46(1), pages 316-326.
    16. Prettner, Klaus & Werner, Katharina, 2016. "Why it pays off to pay us well: The impact of basic research on economic growth and welfare," Research Policy, Elsevier, vol. 45(5), pages 1075-1090.
    17. Benjamin Montmartin & Nadine Massard, 2015. "Is Financial Support For Private R&D Always Justified? A Discussion Based On The Literature On Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 29(3), pages 479-505, July.
    18. Klenow, Peter J. & Rodriguez-Clare, Andres, 2005. "Externalities and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 11, pages 817-861, Elsevier.
    19. Cozzi, Guido, 2021. "Semi-Endogenous or Fully Endogenous Growth? A Simple Unified Theory," MPRA Paper 110681, University Library of Munich, Germany.
    20. Funk, Peter, 2008. "Entry and growth in a perfectly competitive vintage model," Journal of Economic Theory, Elsevier, vol. 138(1), pages 211-236, January.
    21. Christopher Laincz & Pietro Peretto, 2006. "Scale effects in endogenous growth theory: an error of aggregation not specification," Journal of Economic Growth, Springer, vol. 11(3), pages 263-288, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vie:viennp:vie0609. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Paper Administrator (email available below). General contact details of provider: https://econ.univie.ac.at/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.