Coordination Frictions and Economic Growth

Miroslav Gabrovski

No 201810, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: In practice, firms face a mass of scarce innovation projects. They choose one research avenue towards which to direct their effort, but do not coordinate these choices. This gives rise to coordination frictions. This paper develops an expanding-variety growth model to study the impact of these frictions on the economy. The coordination failure generates a mass of foregone innovation and reduces the economy-wide research intensity. Both effects decrease the growth rate. Because of this, the frictions also amplify the fraction of wasteful simultaneous innovation. A calibration suggests the impact of coordination frictions on the growth rate and welfare is substantial.

Keywords: Growth; Frictions; Coordination; Simultaneous Innovation; Search for Ideas (search for similar items in EconPapers)
JEL-codes: O30 O31 O32 O33 O40 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-gro and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.economics.hawaii.edu/research/workingpapers/WP_18-10.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: Coordination frictions and economic growth (2023)
Working Paper: Coordination Frictions and Economic Growth (2017)
Working Paper: Coordination Frictions and Economic Growth (2017)
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