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ICT-Investment, Knowledge Accumulation and Endogenous Growth

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  • Zon Adriaan van


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    In this paper we present an endogenous growth model based on Lucas (1988). We have extended the Lucas model by incorporating ICT-capital next to human capital. We take account of spillovers from ICT use in human capital formation to final output production. The effects on growth of these spillovers depend very much on whether they are external or completely internalised. We find that welfare is positively affected, the stronger these spillovers are, but also the more these spillovers are internalised. In addition, we find that in the case of limited internalised knowledge spillovers, we may face a multiple equilibria steady state growth situation, that has an inherent tendency to select the non-optimum (high growth) equilibrium in which all types of capital are ‘over accumulated’, including ICT-capital. This suggests that there is room for policy intervention here, because there exists an ‘optimum’ value of the knowledge-spillover parameter where both equilibria coincide and over accumulation does not happen.

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    Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 037.

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    Date of creation: 2001
    Handle: RePEc:unm:umamer:2001037
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