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Directed Technical Change under Dual-Use Innovation

Author

Listed:
  • Tiago Neves Sequeira

    (University of Coimbra, Faculty of Economics and CeBER)

Abstract

Many frontier technologies generate both civilian and military applications, raising the question of how policies targeting one application influence innovation when knowledge is shared across sectors. This paper develops a Schumpeterian model of directed technical change in which civilian, military and dual-use technologies coexist as endogenous innovation ladders. The key innovation is to distinguish between a non-rival stock of knowledge generated by dual-use research and rival intermediate goods supplying civilian and military markets. Consequently, policy interventions in one sector redirect research incentives throughout the economy. The model admits a stable balanced-growth path with an interior allocation of research effort. A calibration based on U.S. patent stocks, aggregate R&D intensity and defence R&D expenditure illustrates the transition dynamics. Modest policy interventions substantially redirect innovation towards dual-use technologies, generating civilian knowledge spillovers while leaving long-run aggregate growth largely unchanged.

Suggested Citation

  • Tiago Neves Sequeira, 2026. "Directed Technical Change under Dual-Use Innovation," CeBER Working Papers 2026-06, Centre for Business and Economics Research (CeBER), University of Coimbra.
    • Handle: RePEc:gmf:papers:2026-06
    as

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    References listed on IDEAS

    as
    1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    2. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
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    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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