Endogenous Innovation Research Articles

Vintage capital accumulation: Endogenous growth conditions

Optimal vintage capital accumulation is examined here under asymptotic endogenous growth conditions without input parametrization. It is shown that technological embodiment implies endogeneity of innovations. Vintange capital accumulation and time preference are shown to determine the endogenous rate of vintage capital depletion and the rate at which endogenous innovations occur. A vintage-truncation in capital utilization is shown to induce a time-truncation in the infinite-horizon vintage capital accumulation problem. Factor-augmenting technological change is not assumed a priori, but is shown to be a property of optimal vintage selection under balanced growth conditions.

Optimal pollution taxes and endogenous technological progress

The optimal pollution tax becomes complicated when allowance is made for endogenous innovation, under a patent system. However, if anything, it is below marginal environmental damages, to counteract monopoly pricing by the patent holder, the common pool effect associated with research and a possible excess of patent holder revenue over the social benefits from innovation when environmental damages are convex. In cases where patents are weak at securing appropriability, for example when rivals can easily imitate around patented technologies, awarding research prizes or contracts is probably more efficient than raising the pollution tax.

Uneven Growth between Interdependent Economies: An Evolutionary View on Technology Gaps, Trade and Growth.

Preface. Part One. Theory and empirics of international growth rate differentials and technology gaps. Chapter 1. Technology, growth and welfare: a historical perspective. 1.1. The search for welfare and the role of technology. 1.2. Aim of the book. 1.3. Organisation of the rest of the book. Notes. Chapter 2. The literature on economic growth and technological change. 2.1. A brief overview. 2.2. The traditional literature on economic growth. 2.3. New neoclassical growth models: endogenous innovation. 2.4. The role of technological change. 2.5. Explaining growth rate differentials. Notes. Chapter 3. An evolutionary theory of economic growth and technological change: the basics. 3.1. Economic growth as an evolutionary process: a macroeconomic interpretation. 3.2. Economic growth as an evolutionary process: a microeconomic interpretation. 3.3. Towards an evolutionary theory. Notes. Chapter 4. Technology and growth in an international perspective, 1960-1990: an impressionistic approach. 4.1. Economic growth and structural change. 4.2. Technology. 4.3. Technology and growth: catching up or falling behind? A global issue. 4.4. Summary and conclusions. Appendix IV.1. Postwar economic welfare and the selection of country samples. Appendix IV.2. The 3-digit ISIC sector classification (revision 2). Appendix IV.3. On measuring and graphing structural differences between countries. Appendix IV.4. Some tests for the influence of multicollinearity on the regressions in section 4.2. Notes. Part Two. Technology spillovers between interdependent economies: catching up or falling behind?. Chapter 5. A model of catching up or falling behind. 5.1. Description of the model. 5.2. Solving the model. 5.3. The outcomes of the model under varying parameter restrictions. 5.4. Conclusions of the model. Notes. Chapter 6. An empirical test of the model. 6.1. Testing procedure and data sources. 6.2. Result. 6.3. Interpreting the results. 6.4. Summary and some policy conclusions. Appendix VI.l. A description of the data. Appendix VI.2. The calculation of the N-statistic. Notes. Part Three. Technological change, international trade and economic growth. Chapter 7. An evolutionary model of technological change, specialisation and economic growth. 7.1. A descriptive interpretation. 7.2. The model. 7.3. Simulation results. 7.4. Summary and conclusions. Appendix VII.1. Initial values of the simulation runs for the 3-country 2-sector case. Appendix VII.2. Some mathematical details of the selection equation in discrete time. Notes. Chapter 8. An empirical view on the evolution of trade and technology. 8.1. Patents as indicators of innovation. 8.2. Summarising some known correlations. 8.3. Trade and technology: a dynamic evolutionary framework. 8.4. Estimation of the replicator equation. 8.5. Some further tests on the robustness of the replicator estimates. 8.6. Explaining the results for the patent variables. 8.7. Summary and conclusions.

A Schumpeterian model of endogenous innovation and growth

A disequilibrium model of endogenous innovation and growth is presented. The behaviour of the agents is supposed to be governed by routines, not by maximization. The entrepreneurs are assumed to invest a fraction of their operating profits in real capital accumulation, and another fraction in R&D. The latter leads to an increase in labour productivity via a R&D production function. In this ‘Schumpeterian’ model, not only the R&D processes of innovations are considered, but the diffusion processes as well. As in Schumpeter's theory of economic development the economic impact of technical change is considered a disequilibrium phenomenon. Thus, in a capitalist economy characterized by ongoing diffusion processes of innovations, time averages are more important than steady state values even in a long run perspective.

Endogenous Innovation in the Theory of Growth

This paper makes the case that purposive, profit-seeking investments in knowledge play a critical role in the long-run growth process. First, the authors review the implications of neoclassical growth theory and the more recent theories of ‘endogenous growth.’ Then they discuss the empirical evidence that bears on the modeling of long-run growth. Finally, the authors describe in more detail a model of growth based on endogenous technological progress and discuss the lessons that such models can teach us.

Money and Financial Markets.

Introduction - money and financial markets, Mark P.Taylor. Part 1 Assessing the literature: money demand analysis - an outline, Keith Cuthbertson, David Barlow financial market analysis - an outline, Ronald MacDonald and Mark P.Taylor. Part 2 Money demand studies: money demand in five major countries, estimating and interpreting error-correction models, James M.Boughton modelling broad and narrow money, a study using cointegration, Martin Brookes et al endogenous financial innovation and the demand for MO, Peter Westaway and David Walton money demand in high-inflation countries, a South American perpsective, Kate Phylakis and Mark P.Taylor the demand for money in four countries in the interwar period - a study using monthly data, Jonathan Slow et al. Part 3 Money and financial markets: some news on covered interest arbitrage, Mark P.Taylor, Patricia Fraser monitoring bank risk - a market based approach, David Miles, Stephen Hall information, interest rates and the volatility of asset prices, Laurence Copeland, Richard C. Stapleton the decision to disclose research and development expenditure in the presence of a takeover threat, Jane Black, Ian Tonks persistence in stock market returns - a disaggregated perspective, Roanld MacDonald, David Power global capital market integration and the current account, Michael Artis, Tamim Bayoumi financial disorder and the theory of crisis, E.P.Davis. Part 4 New directions in financial market analysis: neural networks and asset prices, Paul Ormerod chartists, fundamentalists and the transmission of opinion, Alan Kirman.

Substitution and Complementarity in Endogenous Innovation

The influence of Joseph Schumpeter's notion of 'creative destruction' may have led to an overemphasis on substitution between technologies in recent models of endogenous innovation. Historical examples of technological change suggest that new technologies may just as frequently complement older technologies, creating, rather than destroying, rents. Acknowledgement of the potential for both substitution and complementarity among inventions allows for a much richer characterization of the growth process, creating the possibility of threshold effects and multiple equilibria and bringing to the forefront the important role played by the expectations of inventive entrepreneurs.

Endogenous innovation in neoclassical growth models: A survey

Some recent literature in the neo-classical tradition dealing with the relation between endogenous technological change and economic growth is summarized. The main results of this “new” neo-classical approach to economic growth are compared to the basic (Solow) neo-classical growth model. Special attention is paid to the role of government in the process of economic growth and endogenous innovation. An assessment of the main achievements and limitations of the new models will be given.

Endogenous Product Cycles

We construct a model of the product cycle featuring endogenous innovation and endogenous technology transfer. Competitive entrepreneurs in the North expend resources to bring out new products whenever expected present discounted value of future oligopoly profits exceeds current product development costs. Each Northern oligopolist continuously faces the risk that its product will be copied by a Southern imitator, at which time its profit stream will come to an end. In the South, competitive entrepreneurs may devote resources to learning the production processes that have been developed in the North. There too, costs (of reverse engineering) must be covered by a stream of operating profits. We study the determinants of the long-run rate of growth of the world economy, and the long-run rate of technological diffusion. We also provide an analysis of the effects of exogenous events and of public policy on relative wage rates in the two regions.

Quality Ladders and Product Cycles

We develop a two-country model of endogenous innovation and imitation in order to study the interactions between these two processes. Firms in the North race to bring out the next generation of a set of technology-intensive products. Each product potentially can be improved a countably infinite number of times, but quality improvements require the investment of resources and entail uncertain prospects of success. In the South, entrepreneurs invest resources in order to learn the production processes that have been developed in the North. All R&D investment decisions are made by forward looking, profit maximizing entrepreneurs. The steady-state equilibrium is characterized by constant aggregate rates of innovation and imitation. We study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning.

The Determinants of Industrial Research and Development: A Study of the Chemical, Drug, and Petroleum Industries

Economists have recently grown interested in doing research on research or R & D, as it is called in industrial circles. Several studies have tested Schumpeter's hoary hypothesis that large firms are responsible for most industrial inventive activity.1 Few of these studies, however, suggest why this hypothesis is apparently valid for some industries and not for others. And statistical studies going beyond this question, to try to relate R & D expenditures to firm profit expectations and the availability of funds as in other investment decisions, are rare (Mansfield, 1964; Mueller, 1967). This paper reports the results of an empirical investigation into the determinants of research expenditures in three industries-drugs, chemicals, and petroleum refining. These industries have three advantages for such a study: (1) they are among the leaders in total R & D expenditures; (2) most activity is concentrated in an appreciable number of large or moderately large firms; and (3) government support of research work is relatively small, so that decisions are more closely analogous to ordinary