Endogenous technological change: a note on stability

Summary. This paper demonstrates that the steady-state solution of the optimal-growth problem in Romer's (1990) model of endogenous technological change is globally saddle-point stable. Surprisingly, the proof of this result is trivial. Interest in the optimal growth path is justified by the fact that there is a (unique) combination of production and R&D subsidies by means of which the optimal growth path is attained as a market equilibrium. Received: October 6, 1998; revised version: April 19, 1999     

More on subsidizing cooperative and noncooperative R&D in duopoly with spillovers

In an earlier article in this journal I compared two R&D-stimulating policies: allowing for R&D cooperatives and providing direct R&D subsidies (see Hinloopen, 1997:Journal of Economics 66: 151–175). I also considered the implementation of both policies simultaneously. Since then Amir (1998: Discussion Paper 1/1998, Odense University) has shown that the model I used as a starting point (i.e., that of d'Aspremont and Jacquemin, 1988:American Economic Review 78: 1133–1137) is not well-defined with respect to a crucial parameter (the technological spillover) and subsequently proposes an augmentation of the model. Replicating then my original analysis with this augmented model reveals that all results stated before remain valid. In addition I correct a minor error in Hinloopen (1997) related to the comparison of optimal R&D subsidies.     

R&D spillovers and productivity: Evidence from U.S. manufacturing microdata

This paper deals with the estimation of the impact of technology spillovers on productivity at the firm level. Panel data for American manufacturing firms on sales, physical capital inputs, employment and R&D investments are linked to R&D data by industry. The latter data are used to construct four different sets of `indirect' R&D stocks, representing technology obtained through spillovers. The differences between two distinct kinds of spillovers are stressed. Cointegration analysis is introduced into production function estimation. Spillovers are found to have significant positive effects on productivity, although their magnitudes differ between high-tech, medium-tech and low-tech firms. First version received: April 1997/final version received: April 1999     

Endogenous technological change with leisure-dependent utility

Summary. This paper investigates the effect of introducing leisure-dependent utility into two models of endogenous technological change. Due to the flexibility in the labour supply the dynamics of the models change significantly. It is shown that if agents attach enough value to leisure in comparison to consumption two balanced growth paths may exist. This implies that economies with the same preferences and the same technology may experience different long-run growth rates. Received: October 17, 1997; revised version: January 6, 1999     

Endogenous fertility and growth in a model with old age support

Summary. This paper examines the interrelationship between capital accumulation, fertility, and growth by introducing an endogenous fertility decision into Diamond's (1965) neoclassical growth model. Under the assumptions that children provide old age support and that individuals incur a variable time cost of raising children, it investigates the potential for cyclical fluctuations in the capital-labor ratio and fertility, as well as for development trap phenomena to be observed. It is shown that when capital and labor are highly substitutable in production, there is a unique steady state equilibrium, and either damped or undamped oscillations in fertility and the capital-labor ratio may occur. However, when the elasticity of substitution between capital and labor is less than one, two steady state equilibria may exist; one with a high capital-labor ratio and a high rate of population growth, and the other with a lower capital-labor ratio as well as a lower population growth rate. The former is a saddle, while the latter may be either a source or a sink. In the latter case development traps are possible. Received: June 16, 1997; revised version: December 18, 1997     

Technological opportunity and the growth of knowledge: A Schumpeterian approach to measurement

A model of endogenous growth, based on Schumpeter's notion of trustified capitalism, is developed and applied to firm-level data for the period 1973–1991. The model relates the market value of a firm to its current profits and to its R&D expenditures. The relationship depends upon the expected rate of knowledge growth, the expected value of an innovation and the elasticity of the R&D production function. Over the sample period, investors expected knowledge to grow at an average rate of 5 percent, a measure which reflects both process innovations and new product discoveries. Elasticities of the R&D production functions are estimated for thirteen industry groups and interpreted as measures of technological opportunity. There is no evidence of secular decline in technological opportunity over the sample period, but there is some evidence of diminishing returns to R&D intensity. Variations in technological opportunity over time are not correlated across industries. In contrast, the expected rates of knowledge growth at the industry level are highly correlated with the aggregate expected rate.     

Product innovation: testing the relative influence of industry,institutional context and firm factors

This article analyses the influence of industry characteristics (concentration and technological opportunity), the institutional framework (social capital and spillovers from the public sector) and some firm factors (external and internal R&D) on product innovation in a unique integrated framework. Based on a sample of Spanish industrial firms, these variables were found to be positively related to firms’ product innovation. Also, results show that in institutional environments with significant levels of social capital and spillovers, firms change their innovation strategy focusing on external R&D.     

Endogenous uncertainty and the non-neutrality of money

Summary. We study some implications of the Theory of Rational Beliefs to monetary policy. We show that monetary policy in a Rational Beliefs environment can have an important effect on the characteristics of economic fluctuations. In Rational Beliefs Equilibria money is generically non-neutral unlike Rational Expectations Equilibria in which money is neutral and monetary policy is ineffective. Under Rational Beliefs Equilibria nominal prices and real output change not only in response to changes in the exogenous growth rate of money but also in response to changes in the state of beliefs. In Rational Beliefs Equilibria monetary shocks have real effects even when they are observed but are not fully anticipated. Furthermore, the non-neutrality of money results in a short run Phillips curve. When money “flutters, real output sputters” [8]. We show that Endogenous Uncertainty and the distribution of market beliefs are the major explanatory variables of such fluctuations. Under Rational Expectations monetary policy is ineffective because agents neutralize it by predicting correctly the effect of the policy. Under Rational Beliefs it is shown instead that inflation and recessions can be substantially aggravated by the distribution of market beliefs. Received: January 14, 2002; revised version: April 5, 2002 RID="*" ID="*" I would like to thank Mordecai Kurz for his constant help and support. Most of the ideas developed hereby have been inspired by innumerable and fruitful discussions with him. I have also greatly benefited from helpful comments by Stanley Black, Luigi Campiglio, Carsten Nielsen and Ho-Mou Wu. I also received valuable remarks from participants at the V meeting of “The Society for the Advancement of Economic Theory” held in Ischia, Italy, on July 2-8, 2001, where an initial draft of the present work was presented.     

Signalling,Disclosure And The Implications Of Financial Structure For Uk Corporate R&D ∗

This paper investigates the impact of R&D disclosure and finance variables on the level of R&D expenditures. The question addressed is: what is the impact of changes in disclosure requirements on the relationship between R&D expenditure and the financing of firms? The question is motivated by the possible signalling role that elective disclosure may have had prior to changes in accounting practices to ensure R&D disclosure.