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Growth and Firm Dynamics with Horizontal and Vertical R&D

Pedro Gil (), Paulo Brito () and Oscar Afonso

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper develops a tournament model of horizontal and vertical R&D under a lab-equipment specification. A key feature is that the overall growth rate is endogenous, as the splitting of the growth rate between the intensive and the extensive margin is itself endogenous. This setup gives rise to strong inter-R&D composition effects, while making economic growth and firm dynamics closely related, both along the balanced-growth path and transition. The model hence offers a (qualitative) explanation for the negative or insignificant empirical correlation between aggregate R&D intensity and both firm size and economic growth, a well-known puzzle in the growth literature.

Keywords: endogenous growth; vertical and horizontal R&D; firm dynamics; transitional dynamics (search for similar items in EconPapers)
JEL-codes: O41 D43 L16 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-01
New Economics Papers: this item is included in nep-cse, nep-dge, nep-fdg, nep-ino, nep-sbm and nep-tid
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Related works:
Journal Article: GROWTH AND FIRM DYNAMICS WITH HORIZONTAL AND VERTICAL R&D (2013) Downloads
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