Scope of Innovations, Knowledge Spillovers and Growth

Gray, Elie and Grimaud, André (2010) Scope of Innovations, Knowledge Spillovers and Growth. TSE Working Paper, n. 10-161

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Official URL: http://tse-fr.eu/pub/22693

Abstract

This paper exploits the formalization of a circular product differentiation model of Salop (1979) to propose an endogenous growth quality ladder model in which the knowledge inherent in a given sector can spread variously across the sectors of the economy, ranging from local to global influence. Accordingly, this affects the size of the pool of knowledge in which innovations draw
themselves on in order to be produced. Therefore, the law of knowledge accumulation, and thus the growth rate of the economy, depend positively on the expected scope of diffusion of innovations, i.e. on the intensity of knowledge spillovers. This approach generalizes the endogenous growth theory as developed in the seminal models of Grossman & Helpman (1991) and Aghion & Howitt (1992), extending their analysis to the possibility of considering
stochastic and partial knowledge spillovers.
This framework allows us to mitigate the positive externality of knowledge and thus to apprehend the issue of the funding of research with more parsimony. We characterize the set of steady-state Schumpeterian equilibria as a function of the public tools. We provide an explanation for the fact that research effort can either be suboptimal or over-optimal, depending on the expected scope of knowledge. Accordingly, we find that the optimal public tool dedicated to foster R&D activity depends positively on it.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2010
Uncontrolled Keywords: Schumpeterian growth, scope of diffusion of innovations, knowledge spillovers
JEL codes: O30 - General
O31 - Innovation and Invention - Processes and Incentives
O41 - One, Two, and Multisector Growth Models
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:02
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:22693
URI: http://publications.ut-capitole.fr/id/eprint/3373

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