Growth and innovation in the presence of knowledge and R&D accumulation dynamics

Abstract

This article develops a modeling framework for growth and innovation in which accumulation dynamics of knowledge and R&D are explicitly considered. The framework is based on a more general knowledge production process than commonly used in Endogenous Growth Theory and R&D productivity literatures, reconciling as special cases disparate analytical approaches. The proposed model of knowledge dynamics highlights the role of human and physical capital accumulation in the creation of innovations and cautions against their omission in empirical models. Econometric analysis largely supports the model's predictions.