Semi-Endogenous or Fully Endogenous Growth? A Unified Theory.

Cozzi, Guido (2023): Semi-Endogenous or Fully Endogenous Growth? A Unified Theory.

Abstract

Is growth ultimately fully endogenous or semi-endogenous? Three decades of theoretical and empirical growth economics have kept both possibilities open. Here, R & D-driven growth is a general combination of both semi-endogenous and fully endogenous mechanisms. I demonstrate that if the semi-endogenous growth component is indispensable to the actual growth mechanism, the long-run growth rate follows the semi-endogenous growth predictions. Conversely, if the semi-endogenous growth is non-essential and the world population experiences slow growth, the fully endogenous growth mechanism could dictate the long run, even if it is not essential. If no other (third) growth mechanism exists, a criterion sufficient to ascertain the essentiality of semi-endogenous growth is that reduced research consistently leads to fewer innovations. If an unknown third growth engine exists, the steady state remains semi-endogenous, provided the essentiality criterion is met. Regardless of how this third factor impacts short-term growth, semi-endogenous growth will prevail in the long run.

• Item Type: MPRA Paper
• Language: English
• Keywords: Strong scale effect; Semi-endogenous growth; Fully endogenous growth.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

References

Bloom, N., Jones, C., J. Van Reenen, and Webb, M., (2020), "Are Ideas Getting Harder to Find?", American Economic Review, 110, 4, pp. 1104--1144.

Chu, A. and W. Wang (2020), "Effects of R&D Subsidies in a Hybrid Model of Endogenous Growth and Semi-endogenous Growth", Macroeconomics Dynamics, 24, 8, pp. 1-20.

Cozzi, G. 2017a, "Endogenous growth, semi-endogenous growth... or both? A simple hybrid model", Economics Letters, May, 28-30.

Cozzi, G. 2017b, "Combining Semi-Endogenous and Fully Endogenous Growth: a Generalization", Economics Letters, vol. 155, June, page 89-91.

Dinopoulos, E. and Thompson, P.S., 1998, "Schumpeterian Growth Without Scale Effects", Journal of Economic Growth, 3, 313-335.

Ha, J. and Howitt, P., 2007, "Accounting for trends in productivity and R&D: A Schumpeterian critique of semi-endogenous growth theory," Journal of Money, Credit and Banking, 39 (4), 733--774.

Howitt, P., 1999. Steady Endogenous Growth with Population and R&D Inputs Growing. Journal of Political Economy, 107, 715-730. Jones, C., 1995a. "Time Series Tests of Endogenous Growth Models", The Quarterly Journal of Economics, 110,2, pp, 495--525.

Jones, C., 1995b. "R&D-Based Models of Economic Growth," Journal of Political Economy, 103, 4, 759--784.

Jones, C., 1999, "Growth: With or Without Scale Effects?", American Economic Review, 89, 2, pp. 139-144.

Jones, C., 2005, "Growth in a World of Ideas", in P. Aghion and S. Durlauf (eds.) Handbook of Economic Growth, 1063-1111.

Jones, C. and J. Williams, 1998, "Measuring the Social Return to R&D", Quarterly Journal of Economics, 113, 1119-1135.

Kortum, S., 1997, "Research, Patenting, and Technological Change," Econometrica, 65 (6),1389--1419.

Madsen, J. B., 2008: "Semi-Endogenous versus Schumpeterian Growth Models: Testing the Knowledge Production Function Using International Data," Journal of Economic Growth, 13, 1-26.

Minniti, A., Venturini, F., 2017. "The long-run growth effects of R&D policy". Research Policy, pp. 46, 316-326.

Peretto, P., 1998. Technological Change and Population Growth. Journal of Economic Growth, 3, 283-311.

Romer, P., 1990. Endogenous Technological Change. Journal of Political Economy, 98, S71-102.

Segerstrom, P. 1998, "Endogenous Growth Without Scale Effects," American Economic Review, 1290-1310.

Smulders, S. and van de Klundert, T., 1995, "Imperfect competition, concentration and growth with firm-specific R&D," European Economic Review, January, vol. 39(1), 139-160.

Venturini, F., 2012. "Product variety, product quality, and evidence of Schumpeterian endogenous growth: A note", Economics Letters, 117, 74-77.

Young, A., 1998, "Growth without Scale Effects", Journal of Political Economy, 106 (1),41--63.