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The Dynamics of Knowledge Diversity and Economic Growth

Marcus Berliant () and Masahisa Fujita

MPRA Paper from University Library of Munich, Germany

Abstract: How is long run economic growth related to the diversity of knowledge? We formulate and study a microeconomic model of knowledge creation, through the interactions among a group of R & D workers, embedded in a growth model to address this question. Income to these workers accrues as patent income, whereas transmission of newly created knowledge to all such workers occurs due to public transmission of patent information. Our model incorporates two key aspects of the cooperative process of knowledge creation: (i) heterogeneity of people in their state of knowledge is essential for successful cooperation in the joint creation of new ideas, while (ii) the very process of cooperative knowledge creation affects the heterogeneity of people through the accumulation of knowledge in common. The model features myopic R & D workers in a pure externality model of interaction. Surprisingly, in the general case for a large set of initial conditions we find that the equilibrium process of knowledge creation converges to the most productive state, where the population splits into smaller groups of optimal size; close interaction takes place within each group only. Equilibrium paths are found analytically. Long run economic growth is positively related to both the effectiveness of pairwise R & D worker interaction and to the effectiveness of public knowledge transmission.

Keywords: knowledge creation; knowledge externalities; microfoundations of endogenous growth; knowledge diversity and growth (search for similar items in EconPapers)
JEL-codes: D90 D83 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ipr, nep-pr~ and nep-knm
Date: 2008-02-09
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Related works:
Journal Article: The Dynamics of Knowledge Diversity and Economic Growth (2011) Downloads
Working Paper: The Dynamics of Knowledge Diversity and Economic Growth (2010) Downloads
Working Paper: The Dynamics of Knowledge Diversity and Economic Growth (2010) Downloads
Working Paper: The dynamics of knowledge diversity and economic growth (2009) Downloads
Working Paper: The dynamics of knowledge diversity and economic growth (2008) Downloads
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