R&D Capital: An Engine of Growth

Abstract

Research and development (R&D) requires not only skilled research work, but also dedicated machinery and equipment: R&D capital. In this paper I demonstrate that R&D, producing labor-augmenting ideas, and the accumulation of R&D capital can form a dual engine of economic growth. With R&D capital, balanced growth can be sustained even under decreasing returns and in the absence of population growth. This result contributes to the long-lasting debate on endogenous vs. semi-endogenous R&D-based growth and the likelihood of an upcoming secular stagnation.

Keywords: R&D capital, long-run economic growth, growth engine, endogenous growth, secular stagnation