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Innovation and Economic Growth: What is the actual importance of R&D?

  • Argentino Pessoa

    ()

    (Faculdade de Economia, Universidade do Porto)

This paper deals with the relationship between innovation and economic growth in the context of developed world. After examining the correlation between economic growth and R&D (research and development) intensity, and given that the impact of R&D on economic growth is mediated by the rate of growth of technology, we proceed trying to assess the linkage between R&D outlays and economic growth, through the use of the condition of free entry into R&D. Confronted with data, our argumentation shows that the optimism of the endogenous technological change models is not confirmed for countries situated below the technological frontier. Next, based on other economic and technological indicators, a succinct comparison between the Irish and Swedish cases is made. This comparison reveals the importance of investments not classified as R&D, particularly the ones that enhance the external competitiveness of the economy. We conclude that innovation policy must always consider the complexity of the economic growth process and the other ways, besides the ones based on formal R&D indicators, in which technology has an impact on growth.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/07.11.22_wp254_Pessoa.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 254.

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Length: 17 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:por:fepwps:254
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  1. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
  2. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Jones, C-I & Williams, J-C, 1996. "Too Much of a Good Thing? The Economics of Investment in R&D," Papers 538, Harvard - Institute for International Development.
  4. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  5. Basu, Susanto, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 719-51, August.
  6. Ejermo, Olof & Kander, Astrid, 2006. "The Swedish Paradox," Papers in Innovation Studies 2006/1, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
  7. Charles I. Jones & John C. Williams, 1997. "Measuring the social return to R&D," Finance and Economics Discussion Series 1997-12, Board of Governors of the Federal Reserve System (U.S.).
  8. repec:fth:harver:1473 is not listed on IDEAS
  9. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
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