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Endogenous Growth and Investment-Specific Innovations - Evidence and Predictions

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  • Max Elger

    (Stockholm School of Economics)

Abstract

In contrast to the previous literature, we document that more employment in research and development (RnD) yields faster productivity growth. We do not reject the ‘scale effect’ in growth. Previous studies have investigated the impact of RnD-input on total factor productivity growth. We instead focus on investment-specific productivity growth. Besides criticizing the prevailing view of no ’scale effects’ in RnD, we conduct the first quantitative study of endogenous growth with a structural model and time series data. Using quality-adjusted equipment price indexes to identify investment-specific technological progress, our calibrated two-sector endogenous growth model can explain RnD-input in the US over the post-war period. It follows that the model explains the major part of US growth.

Suggested Citation

  • Max Elger, 2007. "Endogenous Growth and Investment-Specific Innovations - Evidence and Predictions," 2007 Meeting Papers 897, Society for Economic Dynamics.
  • Handle: RePEc:red:sed007:897
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