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Capital and interest in horizontal innovation models


  • Man-Seop Park


Horizontal innovation models have a common structure of three sequentially connected sectors. This structure--production of commodities by means of commodities--necessitates the compounding of interest on an input that goes through multiple production periods before the final good is produced. I argue that this aspect is missed (or deliberately assumed away) in typical horizontal innovation models and that this practice generates internal inconsistency in relation to the long run nature of the models. Though discussion is carried out in particular reference to Barro and Sala-i-Martin's 'lab-equipment' model, implications are general. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Suggested Citation

  • Man-Seop Park, 2010. "Capital and interest in horizontal innovation models," Cambridge Journal of Economics, Oxford University Press, vol. 34(4), pages 755-772.
  • Handle: RePEc:oup:cambje:v:34:y:2010:i:4:p:755-772

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    References listed on IDEAS

    1. S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 22(1), pages 1-3, January.
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    Cited by:

    1. Man-Seop Park, 2015. "The Impossibility of Capitalist Instantaneous Production," Metroeconomica, Wiley Blackwell, vol. 66(1), pages 28-50, February.

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    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


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