This paper argues that long-run trends in R&D and TFP are more supportive of fully endogenous “Schumpeterian ” growth theory than they are of semi-endogenous growth theory. The distinctive prediction of semi-endogenous theory is that sustained TFP growth requires sustained growth of R&D input. But in fact, TFP growth has been stationary since the early 1950s even though the growth rate of R&D input has fallen three-fold. Related to this, we show that the cointegration relations implied by semi-endogenous theory are not found in the data and that the theory has consistently predicted a fall in trend TFP growth that has not materialized. In contrast, the prediction of Schumpeterian theory that sustained TFP growth requires a sustained fraction of GDP to be spent on R&D is not contradicted by experience, the cointegration relations implied by Schumpeterian theory are found in the data, and although Schumpeterian theory does not fit the observed time path of TFP much better than semi-endogenous theory it outperforms semi-endogenous theory in predicting TFP growth out of sample. ∗Chris Laincz and Marios Zachariadis provided helpful comments and suggestions. constructive criticisms.

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We assemble a dataset on technology adoption in 1000 bc, 0 ad, and 1500 AD for the predecessors to today’s nation states. Technological differences are surprisingly persistent over long periods of time. Our most interesting, strong, and robust results are for the association of

This paper constructs a scale-free endogenous growth model and studies the determinants of optimal R&D policy. The model combines two of the main approaches to removal of scale effects: the rent protection approach and the diminishing technological opportunities approach. The steady-state rate of innovation is a function of all of the model’s parameters including the R&D subsidy/tax rate. Thus, growth is fully endogenous. Numerical simulations imply that it is optimal to tax R&D when innovations are of very small and very large magnitudes, and to subsidize R&D when innovations are of medium size. Under a wide range of empirically relevant calibrations, the subsidy rate turns out to be positive and fluctuates between 5 to 25 percent. JEL Classification: O3, O4

Abstract This paper argues that growth theory needs a more general "regularity" concept than that of exponential growth. This opens up for considering a richer set of parameter combinations than in standard growth models. Allowing zero population growth in the Jones (1995) model serves as our illustration of the usefulness of a general concept of "regular growth".

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Cumulative innovation is central to economic growth. Do patent rights facilitate or impede such follow-on innovation? This paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeal for the Federal Circuit to control for the endogeneity of patent invalidation. We find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent, on average, but the impact is highly heterogeneous. Patent rights appear to block follow-on innovation only in the technology fields of computers, electronics and medical instruments. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small Cumulative research is a dominant feature of modern innovation. New genetically modified crops, memory chips and medical instruments are typically enhancements of prior generations of related technologies. Of course, cumulative innovation is not new. Economic historians have emphasized the role of path dependence in the development of technology, documenting

This paper develops an idea flows theory of trade and growth with heterogeneous firms. New firms learn from incumbent firms, but the diffusion technology ensures entrants learn not only from frontier technologies, but from the entire technology distribution. By shifting the productivity distribution upwards, selection on productivity causes technology diffusion and this complementarity generates endogenous growth without scale effects. On the balanced growth path, the productivity distribution is a traveling wave with an increasing lower bound. Growth of the lower bound causes dynamic selection. Free entry mandates that trade liberalization increases the rates of technology diffusion and dynamic selection to offset the profits from new export opportunities. Consequently, trade integration raises long-run growth. The dynamic selection effect is a new source of gains from trade not found when firms are homogeneous. Calibrating the model implies that dynamic selection approximat ely triples the gains from trade relative to heterogeneous firm economies with static steady states.

We introduce fertility choice into an R&D-based semi-endogenous growth model so that the economy’s long-run growth rate is again fully en-dogenously determined. The ultimate growth engine is located in the population equation of the model (“people reproduce in proportion to their number”), and R&D carries sustained population growth forward to GDP growth. We indicate the problems stemming from the fact that in the considered class of models, population size ought to enter the utility functional multiplicatively. In particular, we show that second order optimality conditions need not hold and flow utility is required to be positive (levels of utility matter). A simplified “Barro–Becker– Jones ” model which we put forward, reconciles these problems, yields an asymptotic long-run fertility rate along an asymptotic BGP, and is open to further generalizations.

Abstract: We develop a model in which stronger intellectual property rights protection reduces economic growth. We arrive at this conclusion by assuming that entrepreneurs explore and exploit the knowledge that spills over from the R&D in incumbent firms. Intellectual property rights protection allows these firms to prevent or discourage the exploration of that knowledge and thereby reduces the knowledge spillover to entrepreneurs. This implies losses at the societal level, as incumbent firms typically do not commercialize all the knowledge that their R&D develops. According to the theory, allowing incumbent firms to establish ownership and capture the rents that accrue to the entrepreneurs will reduce the returns to entrepreneurship and thereby reduce economic growth.