Fully Endogenous Vertical and Horizontal Growth in R&D-Based Models: Escaping Population-Growth Restriction

Kazuyoshi Ohki

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides benchmark R&D-based growth models in which both vertical and horizontal growth rates are fully endogenous. In traditional models with both vertical and horizontal innovation, horizontal growth or a weighted average of vertical and horizontal growth is often constrained by population growth along the balanced growth path. This paper shows that this restriction arises from balanced-growth requirements imposed by market-clearing conditions and that it can be removed by appropriately specifying R&D externalities. The result is robust across models that differ in the input used in R&D and in the structure of vertical innovation. The reconstructed models also show that innovation policies affect not only the level of growth but also the composition of growth between vertical and horizontal innovation. The proposed formulation therefore provides a tractable building block for richer R&D-based growth models.

Keywords: Economic Growth; R&D; Vertical innovation; Horizontal innovation (search for similar items in EconPapers)
JEL-codes: O31 O32 O41 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:130110

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