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R&D and Economic Growth

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  • Nancy L. Stokey

Abstract

The aggregate rate of R&D in a competitive economy is compared with the optimal rate. The optimal rate of R&D is shown to be the same for all preferences in a broad family, while the competitive rate is sensitive to the form of substitutability among products and so can vary dramatically within a family. The second-best level of R&D is shown to be also common within a family and equal to the optimal rate. Numerical examples suggest that diminishing returns in the innovation technology is the most important potential source for excessive R&D in a competitive economy.

Suggested Citation

  • Nancy L. Stokey, 1995. "R&D and Economic Growth," Review of Economic Studies, Oxford University Press, vol. 62(3), pages 469-489.
  • Handle: RePEc:oup:restud:v:62:y:1995:i:3:p:469-489.
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    File URL: http://hdl.handle.net/10.2307/2298038
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    Cited by:

    1. Charles I. Jones, "undated". "The Upcoming Slowdown in U.S. Economic Growth," Working Papers 97015, Stanford University, Department of Economics.
    2. Paul S. Segerstrom, 2007. "Intel Economics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 247-280, February.
    3. 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.
    4. 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.
    5. Currie, David, et al, 1999. "Phases of Imitation and Innovation in a North-South Endogenous Growth Model," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 60-88, January.
    6. Slavtcheva, Dessislava, 2015. "Financial development, exchange rate regimes and productivity growth: Theory and evidence," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 109-123.
    7. Joseph Zeira, 2011. "Innovations, patent races and endogenous growth," Journal of Economic Growth, Springer, vol. 16(2), pages 135-156, June.
    8. Alberto Bucci, 2005. "Product Market Competition, R&D Effort and Economic Growth," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1011, Universit√° degli Studi di Milano.
    9. Angus Chu, 2009. "Effects of blocking patents on R&D: a quantitative DGE analysis," Journal of Economic Growth, Springer, vol. 14(1), pages 55-78, March.
    10. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, September.
    11. Daron Acemoglu & Ufuk Akcigit, 2006. "State-Dependent Intellectual Property Rights Policy," NBER Working Papers 12775, National Bureau of Economic Research, Inc.
    12. Ted O'Donoghue, 1998. "A Patentability Requirement for Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 654-679, Winter.
    13. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," Journal of Economic Growth, Springer, vol. 9(4), pages 391-421, December.
    14. Orlando Gomes, 2004. "A Second-Order Approximation to Technology Choices," GE, Growth, Math methods 0409007, University Library of Munich, Germany.
    15. Miguel SANTOALHA, 2014. "Socio-economic Impact Assessment of the EMBRC: A Social Cost-Benefit Analysis Approach," Departmental Working Papers 2014-14, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

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