IDEAS home Printed from https://ideas.repec.org/a/bla/scandj/v109y2007i2p369-386.html
   My bibliography  Save this article

Too Much of a Good Thing? The Quantitative Economics of R&D‐driven Growth Revisited

Author

Listed:
  • Holger Strulik

Abstract

This article augments an R&D‐based growth model of the third generation with human capital accumulation and impure altruism, calibrates it with U.S. data, and investigates whether the market provides too little or too much R&D. For benchmark parameters, the market share of employment in R&D is close to the socially optimal solution. Sensitivity analysis shows that the order of magnitude of possible deviation between market R&D and optimal R&D is also smaller than suggested by previous studies. Small deviation of total research effort, however, can be compatible with large sectoral misallocations. Furthermore, the model allows for two additional channels through which population growth may affect the resource allocation so that its overall economic impact is no longer predetermined as positive. Numerical calibrations show that economic growth at the average rate in the U.S. over the last century can be consistent with a small and probably negative partial correlation between population growth and economic growth.

Suggested Citation

  • Holger Strulik, 2007. "Too Much of a Good Thing? The Quantitative Economics of R&D‐driven Growth Revisited," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 369-386, June.
  • Handle: RePEc:bla:scandj:v:109:y:2007:i:2:p:369-386
    DOI: 10.1111/j.1467-9442.2007.00499.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9442.2007.00499.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1467-9442.2007.00499.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," Journal of Economic Growth, Springer, vol. 9(4), pages 391-421, December.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
    4. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    5. Jones, Charles I & Williams, John C, 2000. "Too Much of a Good Thing? The Economics of Investment in R&D," Journal of Economic Growth, Springer, vol. 5(1), pages 65-85, March.
    6. 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.
    7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    8. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    9. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    10. 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.
    11. Laitner, John & Ohlsson, Henry, 2001. "Bequest motives: a comparison of Sweden and the United States," Journal of Public Economics, Elsevier, vol. 79(1), pages 205-236, January.
    12. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    13. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1997. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1121-1166, December.
    14. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
    15. Thomas M. Steger, 2005. "Welfare Implications of Non‐scale R&D‐based Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 737-757, December.
    16. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, June.
    17. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
    18. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1982. "Population size and the social welfare functions of Bentham and Mill," Economics Letters, Elsevier, vol. 10(1-2), pages 61-64.
    19. Dougherty, Chrys & Jorgenson, Dale W, 1996. "International Comparisons of the Sources of Economic Growth," American Economic Review, American Economic Association, vol. 86(2), pages 25-29, May.
    20. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-335, December.
    21. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    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. 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.
    2. 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.
    3. Holger Strulik, 2005. "The Role of Human Capital and Population Growth in R&D‐based Models of Economic Growth," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 129-145, February.
    4. 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.
    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. 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).
    8. Bucci, Alberto, 2013. "Returns to specialization, competition, population, and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2023-2040.
    9. 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.
    10. Elie Gray & André Grimaud, 2016. "The Lindahl equilibrium in Schumpeterian growth models," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 101-142, March.
    11. Alberto BUCCI, 2002. "Market Power, Human Capital and Growth," LIDAM Discussion Papers IRES 2002012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    12. Attar, Mustafa A., 2008. "Science in the Third Dimension of R&D," MPRA Paper 9427, University Library of Munich, Germany.
    13. Dean Scrimgeour, 2015. "Dynamic Scoring in a Romer-Style Economy," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 697-723, January.
    14. Kaixing Huang, 2016. "Demographic Transition and the Unobservable Scale Effects of Economic Growth," School of Economics Working Papers 2016-08, University of Adelaide, School of Economics.
    15. repec:wly:soecon:v:81:3:y:2015:p:697-723 is not listed on IDEAS
    16. Thomas I. Renström & Luca Spataro, 2015. "Population Growth and Human Capital: A Welfarist Approach," Manchester School, University of Manchester, vol. 83, pages 110-141, December.
    17. Boikos, Spyridon & Bucci, Alberto & Stengos, Thanasis, 2013. "Non-monotonicity of fertility in human capital accumulation and economic growth," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 44-59.
    18. Cozzi, Guido & Pataracchia, Beatrice & Pfeiffer, Philipp & Marco, Ratto, 2017. "How much Keynes and how much Schumpeter? An Estimated Macromodel of the US Economy," Working Papers 2017-01, Joint Research Centre, European Commission.
    19. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    20. Ribeiro, M.J., 2000. "A Nonscale Growth Model with R&D and Human Capital Accumulation," The Warwick Economics Research Paper Series (TWERPS) 574, University of Warwick, Department of Economics.
    21. James B. Ang & Jakob B. Madsen, 2011. "Can Second-Generation Endogenous Growth Models Explain the Productivity Trends and Knowledge Production in the Asian Miracle Economies?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1360-1373, November.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    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:bla:scandj:v:109:y:2007:i:2:p:369-386. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442 .

    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: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442 .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.