An uncertainty-based explanation of symmetric growth in Schumpeterian growth models

Guido Cozzi, Paolo Giordani and Luca Zamparelli

No 06-08, Papers from Sonderforschungsbreich 504

Abstract: We provide a re-foundation of the symmetric growth equilibrium characterizing the research sector of all vertical R&D-driven growth models. This result does not rely on the usual assumption of a symmetric expectation on the future per-sector R&D expenditure. Indeed, with this structure of expectations, returns in R&D are equalized, and agents turn out to be indifferent as to where targeting research: hence, the problem of the allocation of R&D investments across sectors is indeterminate. In line with the ’true’ Schumpeterian perspective, we solve this indeterminacy by allowing for decision makers strictly uncertain about the future per-sector distribution of R&D efforts. By using the Gilboa-Schmeidler’s MEU decision rule, we prove that the symmetric structure of R&D investment is the unique rational expectations (RE) equilibrium compatible with uncertainty-averse agents adopting a maximin strategy.

Keywords: R&D-Driven Growth-Models; Multi-Prior Beliefs; Maxmin Strategy; Symmetric Equilibrium (search for similar items in EconPapers)
JEL-codes: D81 O32 O41 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2582

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