GROWTH AND FIRM DYNAMICS WITH HORIZONTAL AND VERTICAL R&D

What is it about?

A negative or weak empirical correlation between 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 that is consistent with that stylized fact. We show that considering innovation as the ultimate source of economic growth is compatible with the above empirical evidence.

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