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Inter-Sectoral Knowledge Diffusion and Scale Effects in Schumpeterian Growth Models

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  • Grimaud, André
  • Gray, Elie

Abstract

We formalize inter-sectoral knowledge diffusion in a standard fully endogenous Schumpeterian growth model. Each sector is simultaneously sending and receiving knowledge; thereby, to produce new knowledge, the research and development activity of each sector draws from a pool of knowledge which stems from this diffusion. This enables us to revisit the scale effects issue by revealing how this property (inconsistent with empirical evidence) relates with knowledge diffusion (the importance of which is empirically highlighted). We show that suppressing knowledge diffusion across sectors is a sufficient but not necessary condition for obtaining scale-invariancy. Then, we identify several sets of assumptions which enable us to obtain models which are reasonably consistent with empirical evidence both on scale effects and how knowledge diffuses in the economy. Specifically, these models do not exhibit scale effects (or at least not significant ones) while considering various scope of knowledge diffusion (including possible occurrence of general-purpose technologies).

Suggested Citation

  • Grimaud, André & Gray, Elie, 2024. "Inter-Sectoral Knowledge Diffusion and Scale Effects in Schumpeterian Growth Models," TSE Working Papers 24-1577, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:129742
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    References listed on IDEAS

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    More about this item

    Keywords

    Schumpeterian growth theory; Scale effects; Knowledge diffusion; Knowledge; spillovers; Non rivalry; echnological distance;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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