Abstract
This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literature on R&D, productivity growth and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for the reduced-form equations for total factor productivity (TFP) growth frequently estimated empirically using industry-level data. R&D affects both innovation and the assimilation of others' discoveries ("absorptive capacity"). Long-run cross-country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D's social rate of return by neglecting absorptive capacity.
Original language | English (US) |
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Pages (from-to) | 99-118 |
Number of pages | 20 |
Journal | Scandinavian Journal of Economics |
Volume | 105 |
Issue number | 1 |
DOIs | |
State | Published - 2003 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
Keywords
- Absorptive capacity
- Endogenous growth
- R and D
- Total factor productivity (TFP)