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Outline

Title
Abstract
Summary
An Overview of Traditional Growth Models
The Convergence Hypothesis
Model Implications
Empirical Investigation: An Introduction
Introduction
Conclusions
References

Technological change, diffusion and output growth

Profile image of Baussola Maurizio LuigiBaussola Maurizio Luigi

1999

Abstract

Bibliography In addition, there is another clear growth effect which derives from changes in the parameter which defines the diffusion path of new capital goods. An increase in the value of this parameter again causes an increase in human capital devoted to research and an upward shift of the diffusion path, thus increasing the long-run growth rate. This result underlines the difference with previous R&D endogenous growth models in that we now have a clear distinction between the sectors producing and using new capital goods. The empirical implications of the theoretical models are then investigated by testing the causal link between R&D and investment, on the one hand, and output growth and investment on the other hand. Indeed, a crucial task of any empirical investigation dealing with endogenous growth theories is to explain the nature of the links between industrial research, investment and economic growth. There is much room for study in this framework, as there are still only a few studies analysing these relationships. Our analysis deals with both aggregate data for the US and UK economies and an intersectoral analysis for the US manufacturing sector. We have used a test procedure which allows us to analyse both the short-run and the long-run properties of the variables using cointegration techniques. We are able to test for any feedback between these variables, thus giving more detailed and robust evidence on the forces underlying the growth process. The results suggests that R&D Granger causes investment in machinery and equipment only in the US economy. However, there is evidence of long-run feedback implying that investment may also affect R&D. In the UK economy there is no evidence for R&D causing investment nor is there strong evidence of long-run feedback between the two variables. This suggests that the causal link between R&D and investment may not be thought of as a stylised fact in industrialised economies. We have also analysed the relationship between investment and output growth to test whether investment may be considered as the key factor in the growth process. We find little support for the hypothesis that investment has a long-run effect on growth. In addition, causality tests support bi-directional causality between these variables in the US economy while in the UK economy, output growth causes investment both in the shortrun and in the long-run. 5 CHAPTER II 2. Technological Change and Endogenous Growth 2.1

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