Optimal Investment in R&D with International Knowledge Spillovers

Aseev, S.M., Hutschenreiter, G., & Kryazhimskiy, A.V. (2002). Optimal Investment in R&D with International Knowledge Spillovers. WIFO Working Papers, No. 175 (March 2002)

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We provide steps towards a welfare analysis of a two-country endogenous growth model where a relatively small follower absorbs part of the knowledge generated in the leading country. To solve a suitably defined infinite-horizon dynamic optimization problem a specialized version of the Pontryagin maximum principle had to be applied. For a quite small follower, optimization produces the same asymptotic rate of innovation as the market. However, relative knowledge stocks and levels of productivity differ in the two solutions. Thus, optimal policy intervention has no effect on long-run growth rates but affects these relative levels.

Item Type: Other
Uncontrolled Keywords: Endogenous growth; R&D spillovers; Absorptive capacities; Dynamic optimization
Research Programs: Dynamic Systems (DYN)
Bibliographic Reference: WIFO Working Papers, No. 175 (March 2002)
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Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 02:14
Last Modified: 27 Aug 2021 17:37
URI: https://pure.iiasa.ac.at/6676

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