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Endogenous innovation waves and economic growth

  • Andergassen, Rainer
  • Nardini, Franco

We propose a simple model where large innovation waves arise from the endogenous propagation of information around sectors. Innovators of each sector invest in internal R&D and in local search for information. We show that depending on the structural parameters of the single sectors, some of the R&D sectors will engage in local search while others will not. Through localised search for information, technology adopted in certain sectors can be adopted also in other sectors, leading to a large technological correlation, and eventually to long ranged innovation waves. We characterise the endogenous balanced growth path of the economy, and the short run fluctuations around it. The model predicts a linear, positive relationship between the short run fluctuations and the long run growth rate. We test this latter relationship and find that we cannot reject the predictions of the model.

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Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 16 (2005)
Issue (Month): 4 (December)
Pages: 522-539

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Handle: RePEc:eee:streco:v:16:y:2005:i:4:p:522-539
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/525148

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