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Too Much of a Good Thing? The Quantitative Economics of R&D–driven Growth Revisited

  • Holger Strulik

    (Department of Economics, University of Copenhagen)

This paper augments an R&D-based growth model of the third generation with human capital accumulation and impure altruism, calibrates it with U.S. data, and investigates whether the market provides too little or too much R&D. For benchmark parameters the market share of employment in R&D is close to the socially optimal allocation. Sensitivity analysis shows that the order of magnitude of possible deviation between market allocation and optimal R&D is also smaller than suggested by previous studies. Furthermore, the model allows for two additional channels through which population growth may affect the resource allocation so that its overall economic impact is no longer predetermined as being positive. Numerical calibrations show that economic growth at the U.S. average rate during the last century can be consistent with a small and probably negative partial correlation between population growth and economic growth.

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File URL: http://www.econ.ku.dk/english/research/publications/wp/2005/0526.pdf/
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 05-26.

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Length: 15 pages
Date of creation: Dec 2005
Handle: RePEc:kud:kuiedp:0526
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  1. 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.
  2. Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, . "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," IPR working papers 95-22, Institute for Policy Resarch at Northwestern University.
  3. Thomas M. Steger, 2005. "Welfare Implications of Non-scale R&D-based Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 737-757, December.
  4. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  5. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  6. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," NBER Working Papers 10625, National Bureau of Economic Research, Inc.
  7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  8. Laitner, J. & Ohlsson, H., 1998. "Bequest Motives: a Comparison of Sweden and the United States," Papers 1998:16, Uppsala - Working Paper Series.
  9. Nerlove, Marc & Razin, Assaf & Sadka, Efraim, 1982. "Population size and the social welfare functions of Bentham and Mill," Economics Letters, Elsevier, vol. 10(1-2), pages 61-64.
  10. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
  11. Charles I. Jones & John C. Williams, . "Measuring the Social Return to R&D," Working Papers 97002, Stanford University, Department of Economics.
  12. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
  13. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
  14. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  15. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
  16. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  17. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  18. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, 08.
  19. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
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