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Institutions, Innovation and Economic Growth

  • Tebaldi, Edinaldo
  • Elmslie, Bruce

This article contributes to the growth literature by developing a formal growth model that provides the basis for studying institutions and technological innovation and examining how human capital and institutional constraints affect the transitional and steady state growth rates of output. The model developed in this article shows that the reason that growth models a-la-Romer (1990) generate endogenous growth is the use of a set of restrictive and unrealistic assumptions regarding the role of institutions in the economy. The baseline model developed in this article shows that the long-run growth of the economy is intrinsically linked to institutions and suggests that an economy with institutions that retard or prevent the utilization of newly invented inputs will experience low levels and low growth rates of output. The model also predicts that countries with institutional barriers that prevent or restrict the adoption of newly invented technologies will allocate a relative small share of human capital in the R&D sector. Moreover, both the baseline and the extended version of the model suggest that sustainable growth in human capital, not an increase in the stock of human capital, generates a growth effect.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9683.

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Date of creation: 13 May 2008
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Handle: RePEc:pra:mprapa:9683
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  1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  2. Gradstein, Mark, 2004. "Governance and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 505-518, April.
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  4. Justus Haucap & Christian Wey, 2004. "Unionisation Structures and Innovation Incentives," Discussion Papers of DIW Berlin 398, DIW Berlin, German Institute for Economic Research.
  5. Xavier Sala-i-Martin, 2001. "15 years of new growth economics: What have we learnt?," Economics Working Papers 620, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2002.
  6. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  7. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  8. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  9. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
  10. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  11. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions As The Fundamental Cause Of Long-Run Growth," DOCUMENTOS CEDE 002889, UNIVERSIDAD DE LOS ANDES-CEDE.
  12. Johannes Fedderke, 2001. "Growth and institutions," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 645-670.
  13. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  14. Chenggang Xu & Haizhou Huang, 1999. "Institutions, Innovations, and Growth," American Economic Review, American Economic Association, vol. 89(2), pages 438-443, May.
  15. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  16. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  17. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers.
  18. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  19. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  20. Rodrik, Dani, 2000. "Institutions For High-Quality Growth: What They Are And How To Acquire Them," CEPR Discussion Papers 2370, C.E.P.R. Discussion Papers.
  21. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
  22. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  23. Lin, Zhengxi & Baldwin, John R., 2001. "Impediments to Advanced Technology Adoption for Canadian Manufacturers," Analytical Studies Branch Research Paper Series 2001173e, Statistics Canada, Analytical Studies Branch.
  24. Jeffrey D. Sachs, 2000. "Tropical Underdevelopment," CID Working Papers 57, Center for International Development at Harvard University.
  25. Gradstein, Mark, 2002. "Rules, stability, and growth," Journal of Development Economics, Elsevier, vol. 67(2), pages 471-484, April.
  26. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
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