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How Important Are Scale Effects for Growth When Knowledge Is a Public Good?

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  • Fernando Sánchez‐Losada

Abstract

In this paper, by proposing an R&D accumulation law for an economy with an expanding number of firms, I seek to reconcile the following three facts: the positive relationship between the fraction of income allocated to R&D expenditure and growth; the positive relationship between the number of firms and total factor productivity growth; and knowledge as a non‐rival and non‐excludable good. There are scale effects because of the public nature of knowledge, but the economy also grows in the absence of population growth. I find that population growth explains one‐fifth of market income growth but only one‐sixteenth of efficient income growth.

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  • Fernando Sánchez‐Losada, 2019. "How Important Are Scale Effects for Growth When Knowledge Is a Public Good?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 763-782, April.
    • Handle: RePEc:bla:scandj:v:121:y:2019:i:2:p:763-782
    DOI: 10.1111/sjoe.12273
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    References listed on IDEAS

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