Technological Opportunity, Long-Run Growth, and Convergence

CORE Discussion Paper No. 2007/57

30 Pages Posted: 6 Sep 2007  

Jakub Growiec

National Bank of Poland; Warsaw School of Economics (SGH)

Ingmar Schumacher

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: August 2007

Abstract

We derive an R&D-based semi-endogenous growth model where technological progress depends on the available amount of technological opportunity. Incremental innovations provide direct increases in the knowledge stock but they reduce technological opportunity and thus the potential for further improvements. Technological opportunity can be renewed only by radical innovations (which have no direct impact on factor productivity). Investigating the model for its implications on economic growth leads to two basic observations. One, in the long-run, a balanced growth path with a constant and semi-endogenous long-run economic growth rate exists only in a specific knife-edge case which implies that technological opportunity and knowledge grow at equal rates. Two, the transition need not be monotonic. Specifically, we show under which conditions our model generates endogenous business cycles via complex dynamics without uncertainty.

Keywords: technological opportunity, incremental innovation, radical innovation, endogenous business cycles, balanced growth, Andronov-Hopf bifurcation, complex dynamics

JEL Classification: E32, O30, O41

Suggested Citation

Growiec, Jakub and Schumacher, Ingmar, Technological Opportunity, Long-Run Growth, and Convergence (August 2007). Available at SSRN: https://ssrn.com/abstract=1012265 or http://dx.doi.org/10.2139/ssrn.1012265

Jakub Growiec (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH)

Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Ingmar Schumacher

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

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