Growth and firm dynamics with horizontal and vertical R&D

Gil, Pedro Mazeda; Brito, Paulo; Afonso, Oscar

http://hdl.handle.net/10400.5/30430

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Authors

Gil, Pedro Mazeda

Brito, Paulo

Afonso, Oscar

Abstract(s)

A negative or nonsignificant empirical correlation between aggregate R&D intensity and the economic growth rate is a well-known fact in the empirical growth literature, but scarcely addressed in the theoretical growth literature. This paper develops an endogenous-growth model that explores the interrelation between horizontal and vertical R&D under a lab-equipment specification that is consistent with that stylized fact. A key feature is that the growth rate is fully endogenous both on the intensive and on the extensive margin. Strong composition effects between horizontal and vertical R&D, along both transition and the balanced-growth path, then emerge as the main mechanism producing those results. This setting also allows us to obtain a relationship between economic growth and firm dynamics that is consistent with the empirical facts.

Keywords

Endogenous Growth Vertical and Horizontal R&D Firm Dynamics Piecewise Smooth Dynamics

URI

http://hdl.handle.net/10400.5/30430

Citation

Gil, Pedro Mazeda; Paulo Brito and Oscar Afonso .(2013). “Growth and firm dynamics with horizontal and vertical R&D”. Macroeconomic Dynamics, Volume 17, No. 7: pp. 1438–1466. (Search PDF in 2024).