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Rising R&D Intensity and Economic Growth

  • Andreas Pollak

Over the past decades, private R&D spending in the US and other developed countries has been growing faster than GDP. In the United States, for example, R&D expenditures (excluding those funded by the federal government) have grown from 0.63% of GDP in 1953 to 1.95% of GDP in 2007, i.e. R&D intensity has increased by more than a factor of three in half a century. At the same time, the growth rates of per capita and aggregate output have been rather stable, possibly declining slightly. Standard models of endogenous growth and R&D cannot easily reproduce or explain this observation, not even along a transition path. This paper proposes a growth model that can account for the observed phenomenon by explicitly describing competition among technological leaders and followers in individual markets in a way that is consistent with existing studies on firms’ motivation to invest in R&D. The model shows that it is possible that the eventually unsustainable trend of rising R&D intensity persists for a very long time.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_057.

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Length: 37 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:deg:conpap:c015_057
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  1. repec:fiu:wpaper:0502 is not listed on IDEAS
  2. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  4. Vincenzo Denicol� & Piercarlo Zanchettin, 2010. "Competition, Market Selection and Growth," Economic Journal, Royal Economic Society, vol. 120(545), pages 761-785, 06.
  5. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  6. Mihaela Iulia Pintea & Peter Thompson, 2007. "Technological Complexity and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(2), pages 276-293, April.
  7. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
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