Monetary Policy in a Schumpeterian Growth Model with Two R&D Sectors

HUMAN CAPITAL AND INNOVATION IN A MONETARY SCHUMPETERIAN GROWTH MODEL

Macroeconomic Dynamics ◽

10.1017/s1365100517000487 ◽

2017 ◽

Vol 23 (5) ◽

pp. 1875-1894 ◽

Cited By ~ 5

Author(s):

Angus C. Chu ◽

Lei Ning ◽

Dongming Zhu

Keyword(s):

Monetary Policy ◽

Human Capital ◽

Interest Rate ◽

Growth Model ◽

Growth Rates ◽

Capital Accumulation ◽

Nominal Interest Rate ◽

Human Capital Accumulation ◽

Schumpeterian Growth ◽

Long Run

This study explores the growth and welfare effects of monetary policy in a scale-invariant Schumpeterian growth model with endogenous human capital accumulation. We model money demand via a cash-in-advance (CIA) constraint on research and development (R&D) investment. Our results can be summarized as follows. We find that an increase in the nominal interest rate leads to a decrease in R&D and human capital investment, which, in turn, reduces the long-run growth rates of technology and output. This result stands in stark contrast to the case of exogenous human capital accumulation in which the long-run growth rates of technology and output are independent of the nominal interest rate. Simulating the transitional dynamics, we find that the additional long-run growth effect under endogenous human capital accumulation amplifies the welfare effect of monetary policy. Decreasing the nominal interest rate from 10% to 0% leads to a welfare gain that is equivalent to a permanent increase in consumption of 2.82% (2.38%) under endogenous (exogenous) human capital accumulation.

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R&D Heterogeneity and the Impact of R&D Subsidies*

The Economic Journal ◽

10.1093/ej/ueab021 ◽

2021 ◽

Author(s):

Sigurd M⊘lster Galaasen ◽

Alfonso Irarrazabal

Keyword(s):

Economic Impact ◽

Growth Model ◽

Relative Size ◽

Schumpeterian Growth ◽

Size Dependent ◽

Investment Growth ◽

The Impact ◽

D Investment ◽

Model Fits

Abstract This paper studies the determinants of R&D heterogeneity and the economic impact of R&D subsidies. We estimate a Schumpeterian growth model featuring firms with heterogeneous innovation efficiencies. The model fits well the R&D investment distribution, and the frequency and relative size of R&D performers. Using the model we study the impact of a Norwegian R&D reform targeting firms with R&D spending below a certain threshold. The size-dependent subsidy increases aggregate R&D investment by 11.7%, but reduces growth and welfare. In contrast, a uniform subsidy stimulates investment, growth and welfare.

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Effects of patents on the transition from stagnation to growth

Journal of Population Economics ◽

10.1007/s00148-019-00753-6 ◽

2019 ◽

Vol 33 (2) ◽

pp. 395-411 ◽

Cited By ~ 2

Author(s):

Angus C. Chu ◽

Zonglai Kou ◽

Xilin Wang

Keyword(s):

Economic Growth ◽

Intellectual Property ◽

Property Rights ◽

Population Size ◽

Intellectual Property Rights ◽

Growth Model ◽

Patent Protection ◽

Theoretic Analysis ◽

Schumpeterian Growth ◽

Long Run

Abstract This study provides a growth-theoretic analysis of the effects of intellectual property rights on the take-off of an economy from an era of stagnation to a state of sustained economic growth. We incorporate patent protection into a Schumpeterian growth model in which take-off occurs when the population size crosses an endogenous threshold. We find that strengthening patent protection has contrasting effects on economic growth at different stages of development. Specifically, it leads to an earlier take-off but also reduces economic growth in the long run.

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