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Growth and Firm Dynamics with Horizontal and Vertical R&D

Author

Listed:
  • Pedro Rui Mazeda Gil

    () (CEF.UP and Faculdade de Economia, Universidade do Porto)

  • Paulo Brito

    () (Instituto Superior de Economia e Gestão and UECE, Universidade Técnica de Lisboa)

  • Óscar Afonso

    () (CEF.UP and Faculdade de Economia, Universidade do Porto)

Abstract

This paper develops a tournament model of horizontal and vertical R&D under a lab-equipment specification. A key feature is that the overall growth rate is endogenous, as the splitting of the growth rate between the intensive and the extensive margin is itself endogenous. This setup gives rise to strong inter-R&D composition effects, while making economic growth and firm dynamics closely related, both along the balanced-growth path and transition. The model hence offers a (qualitative) explanation for the negative or insignificant empirical correlation between aggregate R&D intensity and both firm size and economic growth, a well-known puzzle in the growth literature.

Suggested Citation

  • Pedro Rui Mazeda Gil & Paulo Brito & Óscar Afonso, 2010. "Growth and Firm Dynamics with Horizontal and Vertical R&D," FEP Working Papers 356, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:356
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/10.01.11_wp356.pdf
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    Citations

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    Cited by:

    1. Pedro Mazeda Gil & André Almeida, & Sofia B.S.D. Castro,, 2015. "Flexible Transitional Dynamics in a Non-Scale Fully Endogenous Growth Model," CEF.UP Working Papers 1503, Universidade do Porto, Faculdade de Economia do Porto.
    2. repec:bla:ecorec:v:93:y:2017:i:302:p:434-447 is not listed on IDEAS
    3. Sochirca, Elena & Gil, Pedro Mazeda & Afonso, Oscar, 2014. "Technology structure and skill structure: Costly investment and complementarity effects quantification," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 172-189.
    4. Pedro Mazeda Gil & Fernanda Figueiredo, 2011. "Firm Size Distribution under Horizontal and Vertical Innovation," DEGIT Conference Papers c016_065, DEGIT, Dynamics, Economic Growth, and International Trade.
    5. Pedro Gil & Fernanda Figueiredo, 2013. "Firm size distribution under horizontal and vertical innovation," Journal of Evolutionary Economics, Springer, vol. 23(1), pages 129-161, January.
    6. Pedro Mazeda Gil & Oscar Afonso & Paulo Brito, 2012. "Skill Structure and Technology Structure: Innovation and Growth Implications," FEP Working Papers 470, Universidade do Porto, Faculdade de Economia do Porto.
    7. Pedro Gil, 2013. "Animal spirits and the composition of innovation in a lab-equipment R&D model with transition," Journal of Economics, Springer, vol. 108(1), pages 1-33, January.
    8. Afonso, Óscar, 2016. "Effects of labour-market institutions on employment, wages, R&D intensity and growth in 27 OECD countries: From theory to practice," Economic Modelling, Elsevier, vol. 53(C), pages 48-62.
    9. Pedro Mazeda Gil & Oscar Afonso & Paulo Brito, 2012. "Scale Effects, Relative Supply of Skills, Industrial Structure and Endogenous Growth," DEGIT Conference Papers c017_028, DEGIT, Dynamics, Economic Growth, and International Trade.
    10. Pedro Mazeda Gil & Oscar Afonso & Paulo B. Vasconcelos, 2015. "Skill-Structure Shocks, the Share of the High-Tech Sector and Economic Growth Dynamics," FEP Working Papers 554, Universidade do Porto, Faculdade de Economia do Porto.
    11. Pedro Mazeda Gil & Oscar Afonso & Paulo B. Vasconcelos, 2013. "Industry Dynamics and Aggregate Stability over Transition," FEP Working Papers 484, Universidade do Porto, Faculdade de Economia do Porto.

    More about this item

    Keywords

    endogenous growth; vertical and horizontal R&D; firm dynamics; transitional dynamics;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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