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Endogenous Technological Change under Uncertainty

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  • Paul A. de Hek

Abstract

How does risk or uncertainty in the productivity of research affect the growth rate of the economy? To answer this question, a model of endogenous technological change is used where sustained growth stems from intentional investments in R&D from profit-maximizing firms. The uncertainty arises from the productivity of these investments in R&D. The main result of this analysis is that the relationship between long-run growth and uncertainty (on the productivity of knowledge creation) depends on two main factors - the returns to scale in knowledge creation (increasing or non-increasing) and the value of the elasticity of intertemporal substitution (higher or lower than some critical value). Based on empirical studies on the returns to scale in knowledge creation (”non-increasing”) and the value of the elasticity of intertemporal substitution (”higher than the critical value”), we expect a negative relationship between long-run growth and uncertainty regarding the productivity of knowledge creation.

Suggested Citation

  • Paul A. de Hek, 2003. "Endogenous Technological Change under Uncertainty," DEGIT Conference Papers c008_025, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c008_025
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    More about this item

    Keywords

    Long-run growth; Technological change; Uncertainty;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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