Hostname: page-component-76fb5796d-r6qrq Total loading time: 0 Render date: 2024-04-27T20:40:01.422Z Has data issue: false hasContentIssue false
  • English
  • Français

R&D SUBSIDIES, INTERNATIONAL KNOWLEDGE DIFFUSION, AND FULLY ENDOGENOUS PRODUCTIVITY GROWTH

Published online by Cambridge University Press:  11 June 2014

Colin Davis  and
Ken-ichi Hashimoto
Colin Davis*
Affiliation:
Doshisha University
Ken-ichi Hashimoto
Affiliation:
Kobe University
*
Address correspondence to: Colin Davis, the Institute for the Liberal Arts, Doshisha University, Karasuma Higashi, Imadegawa, Kamigyo, Kyoto, 602-8580, Japan; email: cdavis@mail.doshisha.ac.jp.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper investigates the effects of R&D subsidies on aggregate product variety and endogenous productivity growth without scale effects. In a two-country model with imperfect knowledge diffusion, the larger country has a greater share of firms with higher productivity levels. The concentration of relatively productive firms increases knowledge flows between firms, causing an increase in firm-level employment in innovation. Accordingly, the aggregate growth rate is higher when counties are asymmetric than when they are similar in size. The larger scale of firm-level innovation activity reduces market entry, however, and aggregate product variety falls. In this framework, national R&D subsidies have positive effects on the industry share, relative productivity, and wage rate of the implementing country. If the smaller country introduces an R&D subsidy, aggregate product variety rises and productivity growth falls. If the larger country introduces an R&D subsidy, productivity growth rises, but aggregate product variety may rise or fall.

Keywords

R&D SubsidyKnowledge DiffusionProductivity GrowthScale Effect
Type
Articles
Information
Macroeconomic Dynamics , Volume 19 , Issue 8 , December 2015 , pp. 1816 - 1838
Copyright
Copyright © Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aghion, Philippe and Howitt, Peter (1998) Endogenous Growth. Cambridge, MA: MIT Press.Google Scholar
Baldwin, Richard E. and Forslid, Rikard (2000) The core–periphery model and endogenous growth: Stabilizing and destabilizing integration. Economica 67, 307–324.CrossRefGoogle Scholar
Baldwin, Richard E. and Martin, Philippe (2004) Agglomeration and regional growth. In Henderson, J.V. and Thisse, J.F. (eds.), Handbook of Regional and Urban Economics, Vol. 4, Chap. 60. Amsterdam: Elsevier.Google Scholar
Barro, Robert J. and Sala-i-Martin, Xavier (2004) Economic Growth. Cambridge, MA: MIT Press.Google Scholar
Coe, David T., Elhanan Helpman, and Hoffmaister, Alexander W. (2009) International R&D spillovers and institutions. European Economic Review 53, 723–741.CrossRefGoogle Scholar
David, Paul A., Bronwyn, H. Hall, and Toole, Andrew A. (2000) Is public R&D a complement or substitute for private R&D? A review of the econometric evidence. Research Policy 29, 497–529.CrossRefGoogle Scholar
Devereux, Michael P., Griffith, Rachel, and Simpson, Helen (2007) Firm location decisions, regional grants and agglomeration externalities. Journal of Public Economics 91, 413–435.CrossRefGoogle Scholar
Dinopoulos, Elias and Thompson, Peter (1999) Scale effects in Schumpeterian models of economic growth. Journal of Evolutionary Economics 9, 157–185.CrossRefGoogle Scholar
Dixit, Avinash K. and Stiglitz, Joseph E. (1977) Monopolistic competition and optimum product diversity. American Economic Review 67, 297–308.Google Scholar
Einiö, Elias (in press) R&D subsidies and company performance: Evidence from geographic variation in government funding based on the ERDF population-density rule. Review of Economic Statistics.Google Scholar
Etro, Federico (2009) Endogenous Market Structures and the Macroeconomy. New York: Springer.CrossRefGoogle Scholar
García-Quevedo, José (2004) Do public subsidies complement business R&D? A meta-analysis of econometric evidence. Kyklos 57, 87–102.CrossRefGoogle Scholar
Gil, Pedro Mazeda, Brito, Paulo, and Afonso, Oscar (2013) Growth and firm dynamics with horizontal and vertical R&D. Macroeconomic Dynamics 17, 1438–1466.CrossRefGoogle Scholar
Grossman, Gene M. and Helpman, Elhanan (1991) Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.Google Scholar
Ha, Joonkyung and Howitt, Peter (2007) Accounting for trends in productivity and R&D: A Schumpeterian critique of semi-endogenous growth theory. Journal of Money, Credit and Banking 39, 733–774.CrossRefGoogle Scholar
Hall, Bronwyn H. and John van Reenen (2000) How effective are fiscal incentives for R&D? A review of the evidence. Research Policy 29, 449–469.CrossRefGoogle Scholar
Hines, James R. (1999) Lessons from behavior responses to international taxation. National Tax Journal 52, 305–322.CrossRefGoogle Scholar
Jaffe, Adam B., Manuel Trajtenberg, and Henderson, Rebecca (1993) Geographical localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics 108, 577–598.CrossRefGoogle Scholar
Jones, Charles I. (1995a) R&D-based models of endogenous growth. Journal of Political Economy 103, 759–784.CrossRefGoogle Scholar
Jones, Charles I. (1995b) Times series tests of endogenous growth models. Quarterly Journal of Economics 110, 495–525.CrossRefGoogle Scholar
Keller, Wolfgang (2004) International technology diffusion. Journal of Economic Literature 42, 752–782.CrossRefGoogle Scholar
Kondo, Hiroki (2013) International R&D subsidy competition, industrial agglomeration, and growth. Journal of International Economics 89, 233–251.CrossRefGoogle Scholar
Kortum, Samuel S. (1997) Research patenting and technological change. Econometrica 65, 1389–1419.CrossRefGoogle Scholar
Laincz, Christopher and Peretto, Pietro (2006) Scale effects in endogenous growth theory: An error of aggregation not specification. Journal of Economic Growth 11, 263–288.CrossRefGoogle Scholar
Madsen, Jakob (2008) Semi-endogenous versus Schumpeterian growth models: Testing the knowledge production function using international data. Journal of Economic Growth 13, 1–26.CrossRefGoogle Scholar
Madsen, Jakob (2010) The anatomy of growth in the OECD since 1870. Journal of Monetary Economics 57, 753–767.CrossRefGoogle Scholar
Madsen, Jakob, Ang, James, and Banerjee, Rajabrata (2010b) Four centuries of British economic growth: The roles of technology and population. Journal of Economic Growth 15, 263–290.CrossRefGoogle Scholar
Madsen, Jakob, Saxena, Shishir, and Ang, James (2010a) The Indian growth miracle and endogenous growth. Journal of Development Economics 93, 37–48.CrossRefGoogle Scholar
Mancusi, Maria Luisa (2008) International spillovers and absorptive capacity: A cross-country cross-sector analysis based on patents and citations. Journal of International Economics 76, 155–165.CrossRefGoogle Scholar
Melo, Patricia C., Daniel J. Graham, and Noland, Robert B. (2009) A meta-analysis of estimates of urban agglomeration economies. Regional Science and Urban Economics 39, 332–342.CrossRefGoogle Scholar
Minniti, Antonio and Carmelo Pierpaolo Parello (2011) Trade integration and regional disparity in a model of scale-invariant growth. Regional Science and Urban Economics 41, 20–31.CrossRefGoogle Scholar
Peretto, Pietro (1996) Sunk costs, market structure, and growth. International Economic Review 37, 895–923.CrossRefGoogle Scholar
Rivera-Batiz, Luis A. and Romer, Paul (1991) Economic integration and endogenous growth. Quarterly Journal of Economics 106, 531–555.CrossRefGoogle Scholar
Romer, Paul (1990) Endogenous technological change. Journal of Political Economy 98, S71–102.CrossRefGoogle Scholar
Sedgley, Norman and Elmslie, Bruce (2013) The dynamic properties of endogenous growth models. Macroeconomic Dynamics 17, 1118–1134.CrossRefGoogle Scholar
Segerstrom, Paul (1998) Endogenous growth without scale effects. American Economic Review 88, 1290–1310.Google Scholar
Smulders, Sjak and van de Klundert, Theo (1995) Imperfect competition, concentration, and growth with firm-specific research. European Economic Review 39, 139–160.CrossRefGoogle Scholar
Young, Alwyn (1998) Growth without scale effects. Journal of Political Economy 106, 41–63.CrossRefGoogle Scholar
Zachariadis, Marios (2003) R&D, innovation, and technological progress: A test of the Shumpeterian framework without scale effects. Canadian Journal of Economics 36, 566–586.CrossRefGoogle Scholar
Zachariadis, Marios (2004) R&D-induced growth in the OECD? Review of Development Economics 8, 423–439.CrossRefGoogle Scholar