Endogenous growth and technological progress with innovation driven by social interactions

Abstract

We analyze the implications of innovation and social interactions on economic growth in a stylized endogenous growth model with heterogeneous research firms. A large number of research firms decide whether to innovate or not, by taking into account what competitors (i.e., other firms) do. This is due to the fact that their profits partly depend on an externality related to the share of firms which actively engage in research activities. Such a share of innovative firms also determines the evolution of technology in the macroeconomy, which ultimately drives economic growth. We show that when the externality effect is strong enough multiple BGP equilibria may exist. In such a framework, the economy may face a low growth trap suggesting that it may end up in a situation of slow long-run growth; however, such an outcome may be fully solved by government intervention. We also show that whenever multiple BGP exist, they are metastable meaning that the economy may cyclically fluctuate between the low and high BGP as a result of shocks affecting the individual behavior of research firms. Forthcoming in Economic Theory AbstractWe analyze the implications of innovation and social interactions on economic growth in a stylized endogenous growth model with heterogenous research firms. A large number of research firms decide whether to innovate or not, by taking into account what competitors (i.e., other firms) do. This is due to the fact that their profits partly depend on an externality related to the share of firms which actively engage in research activities. Such a share of innovative firms also determines the evolution of technology in the macroeconomy, which ultimately drives economic growth. We show that when the externality effect is strong enough multiple BGP equilibria may exist. In such a framework, the economy may face a low growth trap suggesting that it may end up in a situation of slow long run growth; however, such an outcome may be fully solved by government intervention. We also show that whenever multiple BGP exist, they are metastable meaning that the economy may cyclically fluctuate between the low and high BGP as a result of shocks affecting the individual behavior of research firms.

Spatial Dynamics for a Generalized Solow Growth Model

“…Boucekkine et al [12] prove the characterization of the optimal dynamics in a spatial AK model across as a circle and Fabbri [13] investigates the generalized model with AK production function in a generic geographic structure. For other studies of spatial economic growth model, the reader is referred to [14][15][16][17][18] and the references therein.…”

Patent Protection, Optimal Licensing, and Innovation With Endogenous Entry

“…11. Horii and Iwaisako (2007) and Marsiglio and Tolotti (2015) also consider a binary choice of research.…”

Social interactions, residential segregation and the dynamics of tipping

“…As mentioned above, even though analyzing the (stochastic) finite population dynamics is not possible, it is possible to analyze the (deterministic) dynamics associated with its asymptotic version in which the number of dwellings N is infinitely large. By following the same argument as in Blume and Durlauf (2003) and Marsiglio and Tolotti (2018), it is possible to derive the following convergence result.…”