Knowledge Codification and Endogenous Growth Theory

Abstract

The present thesis develops a formal model of endogenous growth that incorporates costly knowledge codification as a means of intergenerational knowledge transfer. It identifies the circumstances under which knowledge codification takes place in the long run and studies its effects on long run economic development. The motivation for this work is that knowledge codification is central to utilize the non-rivalry of ideas for economic growth. However, while the usual models of economic growth treat knowledge codification as a by-product of R&D-activities and as costless, one can observe great efforts by private firms for the purposeful codification of knowledge. The first of the thesis' three parts presents a formalization of knowledge codification within a two-sector overlapping generations framework of endogenous economic growth. Although knowledge codification positively influences an economy's long-run output level respectively its long-run growth rate of output, it turns out that initially there will be no knowledge codification in an economy that develops from a small level of capital. Using two different specifications of the research process, we examine under which conditions an economy will codify in the long run. The second part of the thesis elaborates on the robustness of the results obtained from the basic model. Different aspects such as the assumption of Solow-neutral technical progress are discussed and the general properties of the model that drive the main results are identified. The last part of the dissertation starts with a discussion of the relation of the model introduced in the thesis to standard endogenous growth theory. Romer's model of endogenous technological change has been chosen for a comparison. Thereafter, welfare aspects of the market equilibrium in the growth model with costly knowledge codification are illuminated. The focus of these considerations is the identification of potential social inefficiencies of the market solution and the question as to whether it is possible to engineer Pareto-improvements.