The dynamics of knowledge diversity and economic growth

Berliant, Marcus and Fujita, Masahisa (2009): The dynamics of knowledge diversity and economic growth.

Abstract

How is long run economic growth related to the endogenous diversity of knowledge? We formulate and study a microeconomic model of knowledge creation, through the interactions among a group of heterogeneous R & D workers, embedded in a growth model to address this question. In contrast with the traditional literature, in our model the composition of the research work force in terms of knowledge heterogeneity matters, in addition to its size, in determining the production of new knowledge. Moreover, the heterogeneity of the work force is endogenous. 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. Knowledge in common is required for communication, but differential knowledge is useful to bring originality to the endeavor. Whether or not the system reaches the most productive state depends on the strength of the public knowledge transmission technology. 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.

• Item Type: MPRA Paper
• Language: English
• Keywords: knowledge creation; knowledge externalities; microfoundations of endogenous growth; knowledge diversity and growth
• Subjects: D - Microeconomics > D9 - Intertemporal Choice > D90 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

References

Barro, R.J., Sala-i-Martin, X., 1995. Economic Growth. McGraw-Hill, New York.

Berliant, M., Fujita, M., 2008. Knowledge creation as a square dance on the Hilbert cube. International Economic Review 49, 1251-1295.

Berliant, M., Reed, R., Wang, P., 2006. Knowledge exchange, matching, and agglomeration. Journal of Urban Economics 60, 69-95.

Boldrin, M., Levine, D.K., 2005. Against Intellectual Monopoly. Mimeo.

Chatman, J.A., Polzer, J.T., Barsade, S.G., Neale, M.A., 1998. Being different yet feeling similar: The influence of demographic composition and organizational culture on work processes and outcomes. Administrative Science Quarterly 43, 749-780.

Dinopoulos, E., Thompson, P., 1998. Schumpeterian growth without scale effects. Journal of Economic Growth 3, 313-335.

Dixit, A., Stiglitz, J., 1977. Monopolistic competition and optimum product diversity. American Economic Review 67, 297--308.

Duranton, G., Puga, D., 2001. Nursery cities: Urban diversity, process innovation, and the life cycle of products. American Economic Review 91, 1454-1477.

Ghiglino, C., 2005. Balanced Growth with a Network of Ideas. Queen Mary, University of London, Working Paper 546.

Grossman, G., Helpman, E., 1991. Innovation and Growth in the Global Economy. MIT Press, Cambridge, MA.

Guzzo, R.A., Dickson, M.W., 1996. Teams in organizations: Recent research on performance and effectiveness. Annual Review of Psychology 47, 307-338.

Helsley, R.W., Strange, W.C., 2004. Knowledge barter in cities. Journal of Urban Economics 56, 327-345.

Jones, B., 2005. The Burden of Knowledge and the `Death of the Renaissance Man': Is Innovation Getting Harder?. NBER Working Paper 11360.

Jones, C., 1999. Growth: With or without scale effects?. American Economic Association Papers and Proceedings 89, 139-144.

Jones, L., Manuelli, R., 1990. A convex model of equilibrium growth: Theory and policy implications. Journal of Political Economy 98, 1008--1038.

Jovanovic, B., Rob, R., 1989. The growth and diffusion of knowledge. The Review of Economic Studies 56, 569-582.

Lucas, R. E., Jr., 1988. On the mechanics of economic development. Journal of Monetary Economics 22, 2--42.

Olsson, O., 2000. Knowledge as a set in idea space: An epistemological view on growth. Journal of Economic Growth 5, 253-275.

Olsson, O., 2005. Technological opportunity and growth. Journal of Economic Growth 10, 35-57.

Peretto, P., Smulders, S., 2002. Technological distance, growth, and scale effects. The Economic Journal 112, 603-624.

Romer, P., 1986. Increasing returns and long-run growth. Journal of Political Economy 94, 1002--1037.

Romer, P., 1990. Endogenous technological change. Journal of Political Economy 98, S71--S102.

Scotchmer, S., 2004. Innovation and Incentives. MIT Press, Cambridge, MA.

Shell, K., 1966. Toward a theory of inventive activity and capital accumulation. American Economic Review 61, 62--68.

Trajtenberg, M., Shiff, G., Melamed, R., 2006. The "Names Game": Harnessing Inventors' Patent Data for Economic Research. NBER Working Paper 12479.

Walsh, J.P., Nagaoka, S., 2009, Who invents? Evidence from the Japan-US inventor survey, RIETI Discussion Paper Series 09-E-034.

Weitzman, M.L., 1998. Recombinant growth. The Quarterly Journal of Economics 113, 331-360.

Wuchty, S., Jones, B., Uzzi, B., 2007. The increasing dominance of teams in production of knowledge. Science 316, 1036-1039.

Young, A., 1998. Growth without scale effects. Journal of Political Economy 106, 41-63.