Inter-Sectoral Knowledge Diffusion and Scale Effects in Schumpeterian Growth Models

Elie Gray and André Grimaud

Annals of Economics and Statistics, 2024, issue 155, 3-44

Abstract: We formalize inter-sectoral knowledge diffusion in a standard fully endogenous Schumpeterian growth model. Each sector is simultaneously sending and receiving knowledge; thereby, to produce new knowledge, the research and development activity of each sector draws from a pool of knowledge which stems from this diffusion. This enables us to revisit the scale effects issue by revealing how this property (inconsistent with empirical evidence) relates with knowledge diffusion (the importance of which is empirically highlighted). We show that suppressing knowledge diffusion across sectors is a sufficient but not necessary condition for obtaining scale-invariancy. Then, we identify several sets of assumptions which enable us to obtain models which are reasonably consistent with empirical evidence both on scale effects and how knowledge diffuses in the economy. Specifically, these models do not exhibit scale effects (or at least not significant ones) while considering various scope of knowledge diffusion (including possible occurrence of general-purpose technologies).

Keywords: Schumpeterian Growth Theory; Scale Effects; Knowledge Diffusion; Knowledge Spillovers; Non Rivalry; Technological Distance. (search for similar items in EconPapers)
JEL-codes: O30 O31 O33 O40 O41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2024:i:155:p:3-44

DOI: 10.2307/48795036

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