Growth and innovation in the presence of knowledge and R&D accumulation dynamics
Michael Verba
#2015-054
This article develops a model of growth and innovation in which
accumulation dynamics of knowledge and R&D are explicitly considered.
The model is based on a more general knowledge production process than
commonly used in Endogenous Growth Theory and R&D productivity
literatures, reconciling as special cases of a broader framework
disparate analytical approaches. The model of knowledge dynamics
highlights the role of human capital, physical capital, and accumulation
in the creation of innovations and establishes the theoretical
possibility of long-run idea-driven growth without the razor-edge
assumption of Romer (1990) and in the absence of growth in R&D
employment stipulated by Jones (1995). This analysis also predicts the
structure of estimation biases that can result from omission of relevant
factors and failure to take into account the accumulation dynamics of
knowledge and R&D. Empirical estimation supports these predictions.
Findings provide recommendations for future empirical studies aiming to
explain innovation.
JEL Classification: O30, O31, O32, O40
Keywords: Growth theory; innovation; R&D; productivity; knowledge
production function; accumulation