Growth: Scale or Market-Size Effects?

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

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: innovation, economic growth, scale effects, market-size effects
• Subjects: 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

Acemoglu, D., 2002. Directed technical change. Review of Economic Studies, 69, 781-809.

Aghion, P., and Howitt, P., 1992. A model of growth through creative destruction. Econometrica, 60, 323-351.

Chu, A., and Cozzi, G., 2018. Growth: Scale or market-size effects? MPRA Paper No. 89710.

Cozzi, G., 2007. The Arrow effect under competitive R&D. The B.E. Journal of Macroeconomics (Contributions), 7, Article 2.

Cozzi, G., 2017. Endogenous growth, semi-endogenous growth... or both? A simple hybrid model. Economics Letters, 154, 28-30.

Cozzi, G., Giordani, P., and Zamparelli, L., 2007. The refoundation of the symmetric equilibrium in Schumpeterian growth models. Journal of Economic Theory, 136, 788-797.

Evans, L., Quigley, N., and Zhang, J., 2003. Optimal price regulation in a growth model with monopolistic suppliers of intermediate goods. Canadian Journal of Economics, 36, 463-474.

Grossman, G., and Helpman, E., 1991a. Quality ladders in the theory of growth. Review of Economic Studies, 58, 43-61.

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

Howitt, P., 1999. Steady endogenous growth with population and R&D inputs growing. Journal of Political Economy, 107, 715-730.

Jones, C., 1995. R&D-based models of economic growth. Journal of Political Economy, 103, 759-784.

Jones, C., 1999. Growth: With or without scale effects. American Economic Review, 89, 139-144.

Laincz, C., and Peretto, P., 2006. Scale effects in endogenous growth theory: An error of aggregation not specification. Journal of Economic Growth, 11, 263-288.

Peretto, P., 1998. Technological change and population growth. Journal of Economic Growth, 3, 283-311.

Peretto, P., 1999. Cost reduction, entry, and the interdependence of market structure and economic growth. Journal of Monetary Economics, 43, 173-195.

Peretto, P., 2018. Robust endogenous growth. European Economic Review, 108, 49-77.

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

Segerstrom, P., 1998. Endogenous growth without scale effects. American Economic Review, 88, 1290-1310.

Segerstrom, P., Anant, T., and Dinopoulos, E., 1990. A Schumpeterian model of the product life cycle. American Economic Review, 80, 1077-91.

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