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Technological change, diffusion and output growth
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Baussola, Maurizio (1999) Technological change, diffusion and output growth. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b1367925~S1
Abstract
The thesis presents a critical review of both traditional and new growth models
emphasising their main implications and points of controversy. Three main research
directions have been followed, refining hypothesis advanced in the sixties. We first find
models which follow the learning by doing hypothesis and therefore consider knowledge
embodied in physical capital. The second class of models incorporate knowledge within
human capital while the third approach considers knowledge as generated by the research
sector which sells designs to the manufacturing sector producing capital goods. A typical
outcome of such models is the existence of externalities which causes divergence
between market and socially optimal equilibria. Policy intervention aimed at subsidising
either human capital or physical capital is thus justified.
Empirical analysis has received new impetus from the theoretical debate.
However, past empirical tests are mainly based on heterogeneous cross section data
which take into account mean growth rates over given periods of time, and ignore pure
time series analysis. On empirical grounds, the role of investment in the growth process
has been emphasised. This variable has also been decomposed to consider the impact of
machinery and equipment investment alone.
In this thesis we have underlined six aspects of endogenous growth models,
which in our opinion reflect the main points of controversy:
i) scale effects;
ii) the treatment of knowledge as a production input;
iii) the role of institutions;
iv) the empirical controversy dealing with the robustness of growth regression
estimates and the measurement of the impact of some crucial variables (e.g.,
investment) on growth;
v) the simplified representation of R&D;
vi) the absence of any discussion of diffusion phenomena.
We then propose a new version of an R&D endogenous growth model, which
explicitly incorporates the diffusion of innovations and permits comparison with results
derived from other models which do not consider the diffusion process. In this new
model the interaction between the sector producing final output and the sector producing
capital goods generates the time path of diffusion and hence the growth rate of the
economy.
In this new model there is a clear growth effect of a change in the interest rate.
Such a change, on the one hand, affects the determination of the value of human capital
in research, and, on the other hand, affects the diffusion path of new producer durables.
This is important for policy because policy aimed at stimulating growth may be mainly
concerned with reductions of the interest rate and will thus cause a higher allocation to
human capital in research and a larger supply (and use) of new intermediate goods. In addition, there is another clear growth effect which derives from changes in the
parameter which defines the diffusion path of new capital goods. An increase in the
value of this parameter again causes an increase in human capital devoted to research and
an upward shift of the diffusion path, thus increasing the long-run growth rate. This
result underlines the difference with previous R&D endogenous growth models in that
we now have a clear distinction between the sectors producing and using new capital
goods.
The empirical implications of the theoretical models are then investigated by
testing the causal link between R&D and investment, on the one hand, and output
growth and investment on the other hand. Indeed, a crucial task of any empirical
investigation dealing with endogenous growth theories is to explain the nature of the
links between industrial research, investment and economic growth. There is much room
for study in this framework, as there are still only a few studies analysing these
relationships. Our analysis deals with both aggregate data for the US and UK economies
and an intersectoral analysis for the US manufacturing sector. We have used a test
procedure which allows us to analyse both the short-run and the long-run properties of
the variables using cointegration techniques. We are able to test for any feedback
between these variables, thus giving more detailed and robust evidence on the forces
underlying the growth process.
The results suggests that R&D Granger causes investment in machinery and
equipment only in the US economy. However, there is evidence of long-run feed-back
implying that investment may also affect R&D. In the UK economy there is no evidence
for R&D causing investment nor is there strong evidence of long-run feed-back between
the two variables. This suggests that the causal link between R&D and investment may
not be thought of as a stylised fact in industrialised economies.
We have also analysed the relationship between investment and output growth to
test whether investment may be considered as the key factor in the growth process. We
find little support for the hypothesis that investment has a long-run effect on growth. In
addition, causality tests support bi-directional causality between these variables in the US
economy while in the UK economy, output growth causes investment both in the shortrun
and in the long-run.
Item Type: | Thesis (PhD) |
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Subjects: | H Social Sciences > HC Economic History and Conditions |
Library of Congress Subject Headings (LCSH): | Technological innovations, Economic development, Diffusion of innovations |
Official Date: | July 1999 |
Institution: | University of Warwick |
Theses Department: | Warwick Business School |
Thesis Type: | PhD |
Publication Status: | Unpublished |
Supervisor(s)/Advisor: | [Not provided]. |
Extent: | [v], 254 leaves. |
Language: | eng |
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