Macrodynamic Modeling of Innovation Equilibria and Traps

Sanchez-Carrera Edgar J. (), Sebastian Ille and Giuseppe Travaglini
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Sanchez-Carrera Edgar J.: Department of Economics, Society, and Politics, The University of Urbino Carlo Bo, Urbino, Italy
Authors registered in the RePEc Author Service: Edgar J Sánchez Carrera ()

The B.E. Journal of Macroeconomics, 2021, vol. 21, issue 2, 659-694

Abstract: We study the interplay between the decision of firms to innovate and human capital. Based on a dynamic evolutionary model, we show that in the presence of a high stock of human capital, an advanced economy can remain caught in an “innovation trap”. Following the literature on endogenous growth, R&D investments and human capital are modeled as strategic complements. Skilled workers increase productivity and enjoy a wage premium if they are employed in the R&D sector, while they receive the same wage as unskilled workers if they are employed in the production sector. We model the evolutionary dynamics of the share of innovative firms and human capital to determine the conditions under which an economy converges to a high, low or mixed state of innovation.

Keywords: behavioral macroeconomics; evolutionary dynamics; innovative firms; institutions and growth (search for similar items in EconPapers)
JEL-codes: C73 E20 I25 O12 O30 O43 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/bejm-2020-0258

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