Ebook: Investment, R&D, and Long-Run Growth

In the 1990s, growth theory has incorporated imperfect competition in its investigations. This innovation has proven to be seminal: Cleviating from growth models with perfect competition, the new framework featured forward­ looking entrepreneurs. Firms maximize profits intertemporarily, i. e. their in­ vestment leads to instantaneous sunk costs and offers flows of future profits. Firms finance this investment by launching shares. The capital market is per­ fectly competitive, implying that the return on a share is equal to the return on a bond. As opposed to the capital market, the goods market is imperfectly competitive. As a result of investment, firms enjoy market power. That is, firms may acquire the capability to provide a product that is differentiated in, e. g. , styling, technology, accessibility, or reputation. The launch of a dif­ ferentiated product allows to capture a market niche, and successful firms may price above marginal cost. The resulting profit flows are channelled to the firms' shareholders. The introduction of monopolistic competition into growth theory is valuable: real world economies may be portrayed rather by such an imperfect competition framework than by a perfect competition approach. Starting with Romer (1990), in growth theory, modeling of imperfect competition has been notoriously bound to a focus on the impact of research and development (R&D) on economic growth. In the existing literature, growth-affecting investment is restricted to R&D investment.

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This book investigates the relation between investment, R&D, and long-run growth. Its first part surveys the literature on R&D-based growth. This survey is supplemented by a number of classifying tables. In its second part, the book goes beyond the models of R&D-based growth by proposing a more comprehensive view: it sets forth growth models that represent economic growth as being driven by the complementary processes of physical capital investment and R&D activity, rather than by R&D activity alone. For all models presented, schematic representations and illustrative graphs are provided. The reader of this study acquires a fundamental understanding of the relation between investment, R&D, and long-run growth. Thus, this book is helpful not only to those teaching but also the economists researching in the field of growth theory.

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This book investigates the relation between investment, R&D, and long-run growth. Its first part surveys the literature on R&D-based growth. This survey is supplemented by a number of classifying tables. In its second part, the book goes beyond the models of R&D-based growth by proposing a more comprehensive view: it sets forth growth models that represent economic growth as being driven by the complementary processes of physical capital investment and R&D activity, rather than by R&D activity alone. For all models presented, schematic representations and illustrative graphs are provided. The reader of this study acquires a fundamental understanding of the relation between investment, R&D, and long-run growth. Thus, this book is helpful not only to those teaching but also the economists researching in the field of growth theory.
Content:
Front Matter....Pages I-XVI
Introduction....Pages 1-3
Front Matter....Pages 5-5
Literature on R&D-Based Growth....Pages 7-11
Evidence that Suggests a Broader View....Pages 13-22
Front Matter....Pages 23-23
Expanding Product Variety....Pages 25-41
Improving Product Quality....Pages 43-57
Front Matter....Pages 59-59
The Ramsey Model with Imperfect Competition....Pages 61-72
A Generalized AK Model....Pages 73-81
Learning-by-Doing and the Decline in the Relative Price of Capital....Pages 83-93
Front Matter....Pages 95-95
R&D’s Exhaustion Effect....Pages 97-109
Quality Ladders and Excessive Growth....Pages 111-121
Growth without Scale Effects....Pages 123-132
Front Matter....Pages 133-133
R&D and Physical Capital....Pages 135-159
Skilled Workers: Schooling and Specialization....Pages 161-174
Concluding Remarks....Pages 175-176
Back Matter....Pages 177-196

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This book investigates the relation between investment, R&D, and long-run growth. Its first part surveys the literature on R&D-based growth. This survey is supplemented by a number of classifying tables. In its second part, the book goes beyond the models of R&D-based growth by proposing a more comprehensive view: it sets forth growth models that represent economic growth as being driven by the complementary processes of physical capital investment and R&D activity, rather than by R&D activity alone. For all models presented, schematic representations and illustrative graphs are provided. The reader of this study acquires a fundamental understanding of the relation between investment, R&D, and long-run growth. Thus, this book is helpful not only to those teaching but also the economists researching in the field of growth theory.
Content:
Front Matter....Pages I-XVI
Introduction....Pages 1-3
Front Matter....Pages 5-5
Literature on R&D-Based Growth....Pages 7-11
Evidence that Suggests a Broader View....Pages 13-22
Front Matter....Pages 23-23
Expanding Product Variety....Pages 25-41
Improving Product Quality....Pages 43-57
Front Matter....Pages 59-59
The Ramsey Model with Imperfect Competition....Pages 61-72
A Generalized AK Model....Pages 73-81
Learning-by-Doing and the Decline in the Relative Price of Capital....Pages 83-93
Front Matter....Pages 95-95
R&D’s Exhaustion Effect....Pages 97-109
Quality Ladders and Excessive Growth....Pages 111-121
Growth without Scale Effects....Pages 123-132
Front Matter....Pages 133-133
R&D and Physical Capital....Pages 135-159
Skilled Workers: Schooling and Specialization....Pages 161-174
Concluding Remarks....Pages 175-176
Back Matter....Pages 177-196
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