Endogenous Growth and Technological Progress with Innovation Driven by Social Interactions

Simone Marsiglio and Marco Tolotti ()
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Marco Tolotti: Dept. of Management, Università Ca' Foscari Venice

No 9, Working Papers from Venice School of Management - Department of Management, Università Ca' Foscari Venezia

Abstract: We analyze the implications of innovation and social interactions on economic growth in a stylized endogenous growth model with heterogenous research firms. A large number of research firms decide whether to innovate or not, by taking into account what competitors (i.e., other firms) do. This is due to the fact that their profits partly depend on an externality related to the share of firms which actively engage in research activities. Such a share of innovative firms also determines the evolution of technology in the macroeconomy, which ultimately drives economic growth. We show that when the externality effect is strong enough multiple BGP equilibria may exist. In such a framework, the economy may face a low growth trap suggesting that it may end up in a situation of slow long run growth; however, such an outcome may be fully solved by government intervention. We also show that whenever multiple BGP exist, the economy may cyclically fluctuate between the low and high BGP as a result of shocks affecting the individual behavior of research firms.

Keywords: Economic Growth, Innovation; Firms Interaction; Low Growth Trap; Fluctuations (search for similar items in EconPapers)
JEL-codes: C60 D70 O40 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2015-11
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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Journal Article: Endogenous growth and technological progress with innovation driven by social interactions (2018)
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