Structural Change,Urban Congestion,and the End of Growth

This paper develops a two‐sector R&D‐based growth model with congestion effects from increasing urban population density. We show that endogenous technological progress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and Engel's law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long‐run. We also show that land dilution by a larger workforce may give rise to negative scale effects on (GDP) per capita.     

R&;D: A Small Contribution to Productivity Growth

In this article I evaluate the contribution of R&D investments to productivity growth. The basis for the analysis are the free entry condition and the fact that most R&D innovations are embodied. Free entry yields a relationship between the resources devoted to R&D and the growth rate of technology. Since innovators are small, this relationship is not directly affected by the size of R&D externalities, or the presence of aggregate diminishing returns in R&D after controlling for the growth rate of output and the interest rate. The embodiment of R&D-driven innovations bounds the size of the production externalities. The resulting contribution of R&D to productivity growth in the US is smaller than 3–5 tenths of 1% point. This constitutes an upper bound for the case where innovators internalize the consequences of their R&D investments on the cost of conducting future innovations. From a normative perspective, this analysis implies that, if the innovation technology takes the form assumed in the literature, the actual US R&D intensity may be the socially optimal.     

Trade and firm heterogeneity in a Schumpeterian model of growth

The present paper explores the effect of trade liberalization on the level of productivity as well as the rate of productivity growth in an R&D-based model with heterogeneous firms. We introduce new and plausible features that are absent in existing studies. First, technical progress takes the form of continual quality improvement of products over time. Second, firm entry and exit are endogenously determined due to creative destruction of products. In this framework, we demonstrate that a lower transport cost or export sunk cost unambiguously reallocates resources to R&D and top-quality product industries from low-quality good industries. This means that trade liberalization increases the rate of technical progress as well as the level of manufacturing productivity. These results are found to be robust in an extended model with population growth without scale effects.     

Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth

In the early stages of Western industrialization, innovation was the domain of individuals who devoted their entrepreneurial talents to the development of a new product or process, typically setting up a new firm in order to take the innovation to the market. Today, commercial R&;D is almost exclusively carried out by corporate laboratories affiliated with manufacturing firms. The corporate R&;D lab, however, did not exist in its modern form until the late nineteenth century. The history of Western industrialization, thus, suggests that a fundamental change in the structure of incentives, and consequently in the nature and the organization of the R&;D process, occurred around the turn of the century. Three questions arise. What is the nature of this change? What economic forces caused it? What are its implications? To answer these questions, I construct a model where this change is endogenous to the evolution of the economy toward industrial maturity. The change in the locus of innovation—from R&;D undertaken by intventor-entrepreneurs, to R&;D undertaken within established firms in close proximity to the production line—results from the interaction of market structure and technological change. This interaction captures the essence of the evolution of the capitalist engine of growth and provides an economic explanation of a “stylized fact” that has received no attention in the theoretical literature. The endogenous market structure generates dynamic feedbacks that shape the growth path of the economy and determine the structural change it undergoes, including the endogenous formation of corporate R&;D labs. The evolution of market rivalry explains when and how established firms become the major locus of R&;D activity.     

ECONOMIC PERFORMANCE AND PUBLIC INFRASTRUCTURE: AN APPLICATION TO GREEK MANUFACTURING

To comprehend the impact of public infrastructure on economic performance this paper provides a measure of productivity growth as derived from duality theory. This productivity growth is decomposed into the components of technical change, returns to scale and the effects of public infrastructure, the variable of our interest. In an application, we opt for Greek manufacturing so as to investigate whether the decline in its growth rate is partly explained by public infrastructure. Despite some variation in the estimation results of shadow shares across industries, public infrastructure asserts a cost saving effect in most industries, though it also appears that traditional labour‐intensive industries with lower level of technological advancement do not benefit from the provision of public infrastructure. The estimation results further demonstrate that while public infrastructure enhanced productivity growth over the sample period for most industries, low infrastructure investment in the 1970s and the 1980s undermined productivity growth.     

Lagging productivity growth: Measurement,technology, and shock effects

One of the most important problems about which economists have professional knowledge is lagging productivity growth. After illustrating some significant developments this paper addresses three questions: (1) To what extent does R&;D activity drive productivity growth, (2) how do alternative measures of productivity affect the conclusions and (3) how did the oil price shocks and the increased openness of the U.S. economy affect productivity growth? After removing the influence of the extremely dynamic computer industry, average manufacturing industry productivity in the U.S. throughout the 80s grew at a disappointing pace. And it didn't improve in the most dynamic industries. But there is good news as well. First, part of the 1970s productivity slump is clearly attributable to the 1973–74 oil price shock. Second and more important, technological innovation does not appear to have lost its power in driving productivity growth forward. Indeed there is evidence of stronger and more consistent productivity effects from R&;D investment during the 1980s, although the exact channels through which R&;D enhances manufacturing sector productivity are left in doubt. Estimates of the role inter-industry technology flows play are sensitive to aggregation and the conventions used to construct the industry price deflators underlying productivity measures.     

Learning-by-doing in R&D, knowledge threshold, and technological divide

This paper presents a simple R&D-based growth model of the “technological divide,” in which learning-by-doing (investing) in R&D and a threshold level of technological knowledge jointly determine the pattern of economic growth. Specifically, the model generates differences in the growth pattern primarily by modifying the underlying parameters that govern the evolution of economy-wide technological competence or dynamic R&D productivity. The technological divide arises at the threshold level of technological knowledge, which is largely affected by the quality of socio-technological infrastructure. Government policies aimed at enhancing the quality of socio-technological infrastructure can help countries escape from the “technology divide” trap by lowering the knowledge threshold. While the model preserves the spirit of the R&D-based endogenous growth model in the sense of its policy effects and the endogenous evolution of technological competence, the model does not need to reach the scale effect directly, where an increase in the size of an economy generates more rapid growth.     

Effects of blocking patents on R&D: a quantitative DGE analysis

What are the effects of blocking patents on R&;D and consumption? This paper develops a quality-ladder growth model with overlapping intellectual property rights and capital accumulation to quantitatively evaluate the effects of blocking patents. The analysis focuses on two policy variables (a) patent breadth that determines the amount of profits created by an invention and (b) the profit-sharing rule that determines the distribution of profits between current and former inventors along the quality ladder. The model is calibrated to aggregate data of the US economy. Under parameter values that match key features of the US economy and show equilibrium R&;D underinvestment, I find that optimizing the profit-sharing rule of blocking patents would lead to a significant increase in R&;D, consumption and welfare. Also, the paper derives and quantifies a dynamic distortionary effect of patent policy on capital accumulation.     

Land reforms and population growth

One of the greatest puzzles in demographic history is why in the rich and urbanized England, fertility declined much later than in the poor and rural France. We consider the effects of a land reform on demographic growth by a family-optimization model where relative per capita wealth generates social status and welfare. We show that tenant farming is the major obstacle to escaping the Malthusian trap with high fertility and low productivity. A land reform provides peasants with higher returns for their investments, inducing them to increase their productivity and status rather than their family size. Consequently, the population growth rate slows down, but the productivity of land increases.     

Non‐Scale Endogenous Growth with R&D and Human Capital

This paper examines the conditions under which increasing knowledge, encapsulated in ideas for new technology through R&D and embodied in human capital through education, sustains economic growth. A general model is developed where, consistent with recent literature, growth is non‐scale (not increasing in population size) and endogenous (generated by factors within R&D and education). Recent models feature the counterfactual assumption of constant returns to existing knowledge and restrict the substitutability of inputs within R&D and education. We find that non‐scale endogenous growth is possible under less stringent conditions. The findings reconcile sustained economic growth with evidence of diminishing marginal returns in education and R&D, which suggests an ambiguous role for R&D policy.     

Equity Prices, Productivity Growth and 'The New Economy'

The sharp increase in equity prices over the 1990s was widely attributed to permanently higher productivity growth derived from the New Economy. This article establishes a rational expectations model of technology innovations and equity prices, which shows that under plausible assumptions, productivity advances can only have temporary effects on the fundamentals of equity prices. Using historical data on productivity of R&D capital, patent capital and fixed capital for 11 OECD countries, empirical evidence gives strong support for the model by suggesting that technological innovations indeed have only temporary effects on equity returns.     

Capital utilization,economies of scale and technical change in the growth of total factor productivity: An Explanation of South Korean manufacturing Growth

This paper presents a method of interpreting the growth of total factor productivity, directly linking the productivity growth to key parameters of a specific cost function. It shows that the productivity index can be decomposed into effects due to (a) technical change, (b) non-constant returns to scale, and (c) change in capital utilization. The decomposition framework was applied to data on South Korean manufacturing. During the 1961–1980 period in South Korean manufacturing, the total factor productivity was found to have grown at 3% per annum, scale economies contributed about 38% of the growth of TFP, the technical change 45%, and the change in the capital utilization rate 17%. The results of this study support of the view that for growing, less-developed economies, the growth in capital utilization rate is a source of growth in total productivity that is too significant to be ignored.     

A Schumpeterian model of equilibrium unemployment and labor turnover

This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity. In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate – the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate – the resource reallocation effect.     

INTER AND INTRA FIRM DIFFUSION OF ICT IN THE UNITED KINGDOM (UK) AND SWITZERLAND (CH) AN INTERNATIONALLY COMPARATIVE STUDY BASED ON FIRM-LEVEL DATA

This paper examines the effect of participation in government-sponsored R&;D consortia on the R&;D productivity of firms in the case of robot technology in Japan. We attempt to provide a new empirical analysis and discussions on the issue of government project evaluation by investigating the impact of the evolution of government programs, and to compare government-sponsored R&;D consortia with collaborative R&;D among firms. Using indicators of the quality of patents, which enables us to provide an estimation of quality-adjusted research productivity, we find that participation in government programs has a positive impact on the research productivity of participating firms. Moreover, the impact of participation became much higher after the design of government programs in this field changed in the late 1990s. Also, we find that participation in government-sponsored consortia has a greater impact on research productivity than participation in collaborative R&;D among firms. This may support government involvement in R&;D as a coordinator of R&;D collaboration.     

Competition policy in open economies

Abstract

This paper examines aspects of R&;D spillovers across countries, in particular, the role of international trade and human capital as the catalysts for international diffusion of technology. We present a new way of measuring foreign R&;D stocks embodied in foreign intermediate goods and capital equipment, which we argue is free from the criticism of previous measures. With the pooled panel data spanning 1970 through 1995 for 103 countries, we find that the effects of foreign R&;D on total factor productivity growth of both industrial countries and developing countries are substantial and that human capital is the most influential channel for absorbing foreign R&;D spillovers.     

Technological Change and the Scale of Production

Many manufacturing industries, including the computer industry, have seen large increases in productivity growth rates and have experienced a reduction in average establishment size. A vintage capital model is introduced which can account for this fact. It is shown that a rise in the rate of technological change decreases average plant size; that is, the level of innovation affects firm size. Smaller plants are not more innovative, as has been suggested, but industries with more innovation, as measured by productivity growth, have smaller plants. Journal of Economic Literature Classification Numbers: D2, O3.     

Research Subsidies, Population Control Policies, and Growth

Several R&D‐based growth models without scale effects claim that subsidies to R&D are not conductive for economic growth while a faster growing population is. Yet, in an effort to maintain high growth rates, most OECD countries continue to subsidize R&D, while several developing countries are trying to control the size of their population. Are these countries misguided? This study introduces an R&D‐based growth model that is characterized by complementarities between technology and human capital. The model is free of scale effects and consistent with the above‐mentioned policies. By applying the model to US data the study uncovers a possible explanation for the productivity slowdown.     

Sustained Comparative Advantage and Semi-Endogenous Growth

This paper constructs a two-country (Home and Foreign) general-equilibrium model of Schumpeterian growth without scale effects. The scale effects property is removed by introducing a distinct specification in the knowledge production function which generates semi-endogenous growth. In this model of semi-endogenous growth, an increase in the rate of population growth rate raises Home's relative wage and lowers its range of goods exported to Foreign. An increase in the size of innovations increases Home's relative wage but with an ambiguous effect on its comparative advantage. The model generates a unique steady-state equilibrium in which there is complete specialization in both goods and R&D production within each country.     

Reviving and assessing the Kuznets law on innovation

We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and the growth of research and development (R&;D) expenditure. Contrary to expectations, profit growth seems to have little detectable association with subsequent R&;D investment. Instead, firms appear to increase their total R&;D expenditure following growth in sales and employment. In a sense, firms behave ‘as if’ they aim for a roughly constant ratio of R&;D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms, however, suggesting that firms are less willing to reduce their R&;D levels following a negative growth shock than they are willing to increase R&;D after a positive shock.     

Cost structure and technological change of local public transport: the Kaohsiung City Bus case

This study has developed a translog cost function for the Kaohsiung City Bus (KCB) to analyse its cost structure and economic characteristics, based on monthly data over the time period from January 1996 to December 2000. The empirical results reveal that economies of density in the provision of bus services in Kaohsiung do prevail. The estimated marginal cost, which is less than the average cost but greater than the current bus fare, indicates that the subsidy is necessary. Due to the existence of returns to density (RTD), the KCB could obtain cost-saving benefits by extending its output scale. The KCB production technology is also not neutral. The effects of technological change on the KCB costs suggest that over the period 1996–2000 technological progress did lead to cost saving; the pure productivity growth rate increased from 0.45% in 1998 to 3% in 2000.