Skip to main content
    • Aa
    • Aa


  • Pedro Mazeda Gil (a1), Paulo Brito (a2) and Oscar Afonso (a1)

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.

Corresponding author
Address correspondence to: Pedro Mazeda Gil, Rua Dr Roberto Frias, 4200-464, Porto, Portugal; e-mail:
Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

P. Aghion and P. Howitt (1992) A model of growth through creative destruction. Econometrica 60 (2), 323351.

L.G. Arnold (1998) Growth, welfare, and trade in an integrated model of human-capital accumulation and research. Journal of Macroeconomics 20 (1), 81105.

D.B. Audretsch and M. Keilbacha (2008) Resolving the knowledge paradox: Knowledge-spillover entrepreneurship and economic growth. Research Policy 37, 16971705.

G. Bottazzi , E. Cefis , G. Dosi , and A. Secchi (2007) Invariances and diversities in the patterns of industrial evolution: Some evidence from Italian manufacturing industries. Small Business Economics 29, 137159.

J. Caballé and M.S. Santos (1993) On endogenous growth with physical and human capital. Journal of Political Economy 101 (6), 10421067.

J.R. Campbell (1998) Entry, exit, embodied technology, and business cycles. Review of Economic Dynamics 1, 371408.

A. Ciccone and K. Matsuyama (1996) Start-up costs and pecuniary externalities as barriers to economic development. Journal of Development Economics 49, 3359.

G. Cozzi and L. Spinesi (2006) Intellectual appropriability, product differentiation, and growth. Macroeconomic Dynamics 10, 3955.

W.E. Diewert and N. Huang (2011) Capitalizing R&D expenditures. Macroeconomic Dynamics 15, 537564.

E. Dinopoulos and P. Thompson (1998) Schumpeterian growth without scale effects. Journal of Economic Growth 3 (December), 313335.

E. Dinopoulos and P. Thompson (1999) Scale effects in Schumpeterian models of economic growth. Journal of Evolutionary Economics 9, 157185.

F. Etro (2008) Growth leaders. Journal of Macroeconomics 30, 11481172.

P. Francois and H. Lloyd-Ellis (2009) Schumpeterian cycles with pro-cyclical R&D. Review of Economic Dynamics 12 (4), 567591.

P. Geroski (1995) What do we know about entry? International Journal of Industrial Organization 13, 421440.

P.M. Gil (2010) Stylised facts and other empirical evidence on firm dynamics, business cycle and growth. Research in Economics 64, 7380.

P. Howitt (1999) Steady endogenous growth with population and R&D inputs growing. Journal of Political Economy 107 (4), 715730.

C.I. Jones and J.C. Williams (2000) Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5, 6585.

C.A. Laincz and P.F. Peretto (2006) Scale effects in endogenous growth theory: An error of aggregation not specification. Journal of Economic Growth 11, 263288.

F. Malerba and L. Orsenigo (1999) Technology entry, exit and survival: An empirical analysis of patent data. Research Policy 28, 643660.

P. Pagano and F. Schivardi (2003) Firm size distribution and growth. Scandinavian Journal of Economics 105 (2), 255274.

P. Peretto and M. Connolly (2007) The Manhattan metaphor. Journal of Economic Growth 12, 329350.

P. Peretto and S. Smulders (2002) Technological distance, growth and scale effects. Economic Journal 112 (July), 603624.

M. Pintea and P. Thompson (2007) Technological complexity and economic growth. Review of Economic Dynamics 10, 276293.

L. Rivera-Batiz and P. Romer (1991) Economic integration and endogenous growth. Quarterly Journal of Economics 106 (2), 531555.

P.M. Romer (1990) Endogenous technological change. Journal of Political Economy 98 (5), 71102.

R. Samaniego (2007) R&D and growth: The missing link? Macroeconomic Dynamics 11, 691714.

P. Segerstrom (2000) The long-run growth effects of R&D subsidies. Journal of Economic Growth 5, 277305.

P. Segerstrom (2007) Intel economics. International Economic Review 48 (1), 247280.

F. Sener (2008) R&D policies, endogenous growth and scale effects. Journal of Economic Dynamics and Control 32, 38953916.

H. Strulik (2007) Too much of a good thing? The quantitative economics of R&D-driven growth revisited. Scandinavian Journal of Economics 109 (2), 369386.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 25 *
Loading metrics...

Abstract views

Total abstract views: 190 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 23rd September 2017. This data will be updated every 24 hours.