R&D and Economic Growth

Nancy L. Stokey

The Review of Economic Studies, 1995, vol. 62, issue 3, 469-489

Abstract: The aggregate rate of R&D in a competitive economy is compared with the optimal rate. The optimal rate of R&D is shown to be the same for all preferences in a broad family, while the competitive rate is sensitive to the form of substitutability among products and so can vary dramatically within a family. The second-best level of R&D is shown to be also common within a family and equal to the optimal rate. Numerical examples suggest that diminishing returns in the innovation technology is the most important potential source for excessive R&D in a competitive economy.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:62:y:1995:i:3:p:469-489.

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