Sep 21, 2013

Articles in journals

Brito, P., Gil, P., Afonso, O.

17

28

A negative or insignificant empirical correlation between aggregate R&D intensity and the economic growth rate is a well-known fact in the empirical growth literature, but scarcely addressed in the theoretical growth literature. This paper develops an endogenous-growth model that explores the interrelation between horizontal and vertical R&D under a lab-equipment specification that is consistent with that stylised fact. A key feature is that the growth rate is fully endogenous both in the intensive and the extensive margin. Strong composition effects between horizontal and vertical R&D, both along transition and the balanced-growth path, then emerge as the main mechanism producing those results.This setting also allows us to obtain a relationship between economic growth and firm dynamics that is consistent with the empirical facts.

Endogenous Growth,Vertical and Horizontal R&D,Firm Dynamics,Piecewise-smooth Dynamics