Innovation and Growth in the Global Economy

by Grossman, Gene M.; Helpman, Elhanan

• ISBN13: 9780262570978
• ISBN10: 0262570971
• Edition: Reprint
• Format: Paperback
• Copyright: 1993-01-29
• Publisher: The MIT Press

Summary

Traditional growth theory emphasizes the incentives for capital accumulation rather than technological progress; innovation is treated as an exogenous process or a byproduct of investment in machinery and equipment. Grossman and Helpman develop a unique approach in which innovation is viewed as a deliberate outgrowth of investments in industrial research by forward-looking, profit-seeking agents. They also devote attention to the place of international trade in the growth process, including the transmission of innovations from the industrial economies to the LDCs. Grossman and Helpman provide a useful overview of recent analyses of innovation and growth, enriching and expanding the available formal theory in a number of important ways. They develop straightforward theoretical models that treat innovation as the outgrowth of costly investments in industrial research. Such investments respond to profit opportunities, which reflect competitive conditions in national and international product markets. Since firms in different countries race to bring out new products, growth processes are linked by international technological competition. An important aspect of Grossman and Helpman's study, even in relation to recent similar work on endogenous growth, is that they focus on the growth process of a country that operates in a global economy. They allow comparative advantage to be created endogenously in the industrial research laboratory but look at the dynamic determinants in the pattern of trade and the interactions between trade and growth. One chapter is devoted entirely to how economic integration affects a country's innovation and growth, while another studies the effects of national policies in an international environment. The final two chapters take up interaction between the processes of innovation in the industrialized North and imitation in the middle income South.

Author Biography

Gene M. Grossman is Jacob Viner Professor of International Economics and Director of the International Economics Section at Princeton University.

Elhanan Helpman is Professor of Economics at Harvard University, the Archie Sherman Chair Professor of International Economic Relations in the Eitan Berglas School of Economics at Tel-Aviv University, and a Fellow at the Canadian Institute for Advanced Research.

Table of Contents

Preface	xi
Growth and Technology	1	(21)
Facts about Growth	1	(5)
The Contribution of Industrial Innovation	6	(9)
Technology as an Economic Commodity	15	(3)
Method and Organization of the Book	18	(4)
Traditional Growth Theory	22	(21)
Solow	24	(3)
Optimal Savings	27	(8)
Learning by Doing	35	(3)
Basic Research	38	(5)
Expanding Product Variety	43	(41)
Brand Proliferation	45	(12)
Public Knowledge Capital	57	(8)
Industrial Policies	65	(2)
Welfare	67	(17)
Appendix	75	(9)
Rising Product Quality	84	(28)
The Basic Model	86	(13)
Endogenous Quality Increments	99	(2)
Welfare	101	(11)
Appendix	110	(2)
Factor Accumulation	112	(32)
Physical Capital	115	(7)
Human Capital	122	(8)
Country Size and Resource Composition	130	(14)
Appendix	141	(3)
Small Open Economy	144	(33)
A Model with Nontraded Intermediates	145	(7)
Trade and Growth	152	(2)
Trade and Welfare	154	(8)
International Capital Flows	162	(3)
International Knowledge Flows	165	(12)
Appendix	172	(5)
Dynamic Comparative Advantage	177	(29)
International Brand Proliferation	179	(13)
International Quality Competition	192	(5)
Multinational Corporations	197	(3)
Patent Licensing	200	(6)
Hysteresis	206	(31)
A Benchmark Economy	207	(7)
Steady States	214	(4)
Equal-Wage Trajectories	218	(3)
Unequal-Wage Trajectories	221	(8)
R & D Subsidies	229	(8)
Appendix	234	(3)
Trade and Growth	237	(21)
Diffusion of Knowledge	238	(4)
Trade between Similar Countries	242	(4)
Trade with Uneven Innovation	246	(4)
Trade between Dissimilar Countries	250	(8)
International Transmission of Policies	258	(23)
Quality Upgrading: A Graphical Treatment	259	(5)
R&D Subsidies	264	(3)
Production Subsidies	267	(4)
Trade Policies	271	(10)
Appendix	278	(3)
Imitation	281	(29)
A Model of Imitation	283	(6)
Steady-State Equilibrium	289	(5)
Determinants of Innovation and Imitation	294	(6)
Determinants of Relative Wages	300	(10)
Appendix	307	(3)
Product Cycles	310	(24)
Imitation with Rising Product Quality	311	(7)
Steady-State Equilibrium	318	(3)
Efficient Followers	321	(3)
Inefficient Followers	324	(10)
Appendix	328	(6)
Lessons about Growth	334	(9)
References	343	(8)
Index	351