The Structural Transformation of Innovation

Diego Comin, Danial Lashkari and Martí Mestieri

No 33855, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document the structural transformation of innovation using historical patent data since the 1850s, along with R&D expenditure and TFP growth for the post-war period. Over time, innovation has shifted from agricultural sectors to manufacturing, and, more recently, to services. We develop and quantify a multi-sector semi-endogenous growth model of structural change in innovation and production, incorporating the classical demand-pull and technology-push drivers of innovation. Sectors differ in their innovation technologies, and the extent to which they benefit from knowledge spillovers (technology-push). Nonhomothetic demand shifts the market shares toward income-elastic sectors along the growth process (demand-pull). A calibrated version of our model replicates the structural transformations of innovation and production observed in the US data. Using the model, we evaluate the future impact of Baumol’s disease on aggregate productivity and find it to be minimal. Our results suggest that aggregate productivity growth may recover in the coming decades as the service sector becomes increasingly innovation-driven.

JEL-codes: E02 O1 O4 O5 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-cse, nep-sbm and nep-tid
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Working Paper: Structural Transformation of Innovation (2019)
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