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Institutions, Innovations, and Growth

  • Chenggang Xu
  • Haizhou Huang

The fundamental importance of economic institutions for economic growth through their impact on technological change has been argued, reconfirmed by recent empirical studies, but not examined theoretically. This paper tries to fill that gap. In the model proposed, economic growth is affected by the efficiency and riskiness of research and development (R&D), which are endogenized through financial institutions. The theory and its results shed lights on the debate of convergence versus divergence; the “East Asia miracle” versus the East Asia financial crisis; and the rise and fall of centralized economies.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.2.438
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 2 (May)
Pages: 438-443

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:2:p:438-443
Note: DOI: 10.1257/aer.89.2.438
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  1. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, June.
  2. Obstfeld, Maurice, 1992. "Risk-Taking, Global Diversification, and Growth," CEPR Discussion Papers 688, C.E.P.R. Discussion Papers.
  3. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
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  5. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
  6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. Grossman, Gene M & Helpman, Elhanan, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 43-61, January.
  10. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  11. Haizhou Huang & Chenggang Xu, 1998. "Financing Mechanisms and R&D Investment," William Davidson Institute Working Papers Series 180, William Davidson Institute at the University of Michigan.
  12. Berglof, Erik & Roland, Gerard, 1998. "Soft Budget Constraints and Banking in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 18-40, March.
  13. Qian, Yingyi & Xu, Chenggang, 1998. "Innovation and Bureaucracy under Soft and Hard Budget Constraints," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 151-64, January.
  14. Dewatripont, M & Maskin, E, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 541-55, October.
  15. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
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