Berliant, Marcus and Fujita, Masahisa (2008): The Dynamics of Knowledge Diversity and Economic Growth.
Download (490kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||The Dynamics of Knowledge Diversity and Economic Growth|
|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
|Depositing User:||Marcus Berliant|
|Date Deposited:||10. Feb 2008 04:49|
|Last Modified:||21. Feb 2013 06:27|
Barro, R.J., Sala-i-Martin, X., 1995. Economic Growth. McGraw-Hill, New York. Berliant, M., Fujita, M., forthcoming. Knowledge creation as a square dance on the Hilbert cube. To appear in the International Economic Review. 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. 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. Helsley, R.W. and W.C. Strange, 2004. Knowledge barter in cities. Journal of Urban Economics 56, 327-345. 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. 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.