Innovation, specialization and growth in a model of structural change

Rainer Andergassen, Franco Nardini and Massimo Ricottilli

The B.E. Journal of Macroeconomics, 2018, vol. 18, issue 2, 15

Abstract: In this paper we investigate the process of creation and destruction of industries as it stems from productivity increasing innovations and from the induced changes of consumption patterns. In our model industries whose demand increases experience an expansion of the number of intermediate goods and hence of their research effort, while those whose demand declines undergo a cost-cutting restructuring with a corresponding reduction of the number of intermediates. We show that if aggregate consumption is concentrated on high (low) priority goods in the early (later) stages of the economy’s development and spread out more evenly in an intermediate stage, then the diversification of the economy over the development path is inversely U-shaped: a result that is consistent with the empirical evidence in Imbs and Wacziarg 2003 “Stages of Diversification.” American Economic Review 93: 63–86.

Keywords: development; innovation; specialization; structural change (search for similar items in EconPapers)
JEL-codes: O10 O30 O40 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Innovation, specialization and growth in a model of structural change (2010)
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DOI: 10.1515/bejm-2017-0095

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