Innovation Allocation, Knowledge Composition and Long-Run Growth

Nan Li and Jie Cai ()

No 1100, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Technologies differ in their scopes of applications. The types of knowledge a country possesses have important implications on its growth. This paper develop a multi-sector model of innovation, trade and growth, in which knowledge in one sector is applicable to innovation in another sector in various degrees and a country's composition of knowledge is endogenously determined. We find that lower trade costs and better institutions (that increase production productivity) improve aggregate innovation efficiency through the within-country allocation of R&D towards sectors with higher knowledge applicability. We construct measures quantifying the sectoral knowledge applicability using cross-sector patent citations. Based on this index, we present cross-country evidence that broadly supports the model's implications.

Date: 2015
New Economics Papers: this item is included in nep-cse, nep-gro, nep-ino, nep-knm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:1100

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