Coordination Frictions and Economic Growth

Miroslav Gabrovski

MPRA Paper from University Library of Munich, Germany

Abstract: In practice, firms face a mass of scarce innovation projects. They choose a particular research avenue towards which to direct their effort, but do not coordinate these choices. This gives rise to coordination frictions. Our paper develops an expanding-variety endogenous growth model to study the impact of these frictions on the economy. The coordination failure generates a mass of foregone innovation and reduces the economy-wide research intensity. Both of these effects decrease the growth rate. Because of this, the frictions also amplify the fraction of wasteful simultaneous innovation. A numerical exercise suggests that the impact of coordination frictions on both the growth rate and welfare is substantial. This paper also analyzes firm-level data on patents which provide an estimate of the severity of the coordination problems and further evidence in favor of the hypothesis that research avenues are scarce.

Keywords: Growth; Frictions; Coordination; Simultaneous Innovation; Search for Ideas (search for similar items in EconPapers)
JEL-codes: O30 O31 O32 O33 O40 (search for similar items in EconPapers)
Date: 2017-02-16, Revised 2017-07-17
New Economics Papers: this item is included in nep-gro and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/82096/1/MPRA_paper_82096.pdf revised version (application/pdf)

Related works:
Journal Article: Coordination frictions and economic growth (2023)
Working Paper: Coordination Frictions and Economic Growth (2018)
Working Paper: Coordination Frictions and Economic Growth (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:81298

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