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National Productive Structure and Innovative Dynamics: Finding the (Endogenous) Path to Convergence


  • Jorge Cerdeira

    (Faculdade de Economia - Universidade do Porto)

  • Luís Pina Rebelo

    () (Faculdade de Economia e Gestão - Universidade Católica Portuguesa - Porto, and Faculdade de Economia - Universidade do Porto)


We extend the model presented in Barro and Sala-i-Martin (1997) by allowing for two types of economies - more developed and in transition to European Union integration - to both imitate and innovate varieties of intermediate goods. Besides depending on research and development expenditures, we also allow for the stochastic nature of innovation by making it also dependent on a random component. We do this by Monte Carlo simulation, using a Box-Muller process, and solve a three differential equation model by using numerical methods. Two situations are presented: a leading economy with greater institutions and more labour than the transition economy versus a situation where an institutional advance is given to the transition economy.

Suggested Citation

  • Jorge Cerdeira & Luís Pina Rebelo, 2008. "National Productive Structure and Innovative Dynamics: Finding the (Endogenous) Path to Convergence," Working Papers de Economia (Economics Working Papers) 012008, Católica Porto Business School, Universidade Católica Portuguesa.
  • Handle: RePEc:cap:wpaper:012008

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    stochastic innovation; transition economies; growth; technology; diffusion; convergence;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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