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Growth: Scale or Market-Size Effects?

Chu, Angus C. and Cozzi, Guido (2018): Growth: Scale or Market-Size Effects? Forthcoming in: Economics Letters

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Is the supply of researchers or the demand for technologies more important for innovation? The supply of research labor captures a scale effect, whereas the demand from production labor for technologies captures a market-size effect. We find that both the scale effect and the market-size effect are important for innovation and their relative importance depends on R&D labor intensity. We collect data on R&D labor intensity and find that it varies significantly across countries.

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