A Multi-Region Model of Economic Growth with Human Capital and Negative Externalities in Innovation

RIT Economics Department Working Paper No. 12-07

26 Pages Posted: 6 Aug 2012

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: August 6, 2012

Abstract

We use a multi-region model and provide the first theoretical analysis of the effects of human capital use and a particular kind of innovative activity on economic growth. In each of the N heterogeneous regions in our model, consumers have constant relative risk aversion preferences, there are negative externalities in innovation, and there are three kinds of manufacturing activities involving the production of blueprints for inputs or machines, the inputs or machines themselves, and a single final good for consumption. Our analysis generates four salient findings. First, for each of the N regions, we define a balanced growth path equilibrium, we characterize the market clearing factor prices, and we determine the free entry condition in the R&D sector. Second, we show that without growth in human capital, there is no sustained economic growth in any of the N regions. Third, we show that human capital growth generates sustained economic growth in each of the N regions. Finally, when discussing the above three findings, we shed light on the spatial dimensions of economic growth in our multi-region aggregate economy.

Keywords: Economic Growth, Human Capital, Innovation, Multi-Region Economy, Negative Externality

JEL Classification: R11, J24, O30

Suggested Citation

Batabyal, Amitrajeet A. and Nijkamp, Peter, A Multi-Region Model of Economic Growth with Human Capital and Negative Externalities in Innovation (August 6, 2012). RIT Economics Department Working Paper No. 12-07, Available at SSRN: https://ssrn.com/abstract=2125366 or http://dx.doi.org/10.2139/ssrn.2125366

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States
585-475-2805 (Phone)
585-475-5777 (Fax)

HOME PAGE: http://people.rit.edu/aabgsh

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446091 (Phone)
+31 20 4445611 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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