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Institutions, Innovation and Economic Growth

Author

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  • Tebaldi, Edinaldo
  • Elmslie, Bruce
Abstract
This article contributes to the growth literature by developing a formal growth model that provides the basis for studying institutions and technological innovation and examining how human capital and institutional constraints affect the transitional and steady state growth rates of output. The model developed in this article shows that the reason that growth models a-la-Romer (1990) generate endogenous growth is the use of a set of restrictive and unrealistic assumptions regarding the role of institutions in the economy. The baseline model developed in this article shows that the long-run growth of the economy is intrinsically linked to institutions and suggests that an economy with institutions that retard or prevent the utilization of newly invented inputs will experience low levels and low growth rates of output. The model also predicts that countries with institutional barriers that prevent or restrict the adoption of newly invented technologies will allocate a relative small share of human capital in the R&D sector. Moreover, both the baseline and the extended version of the model suggest that sustainable growth in human capital, not an increase in the stock of human capital, generates a growth effect.

Suggested Citation

  • Tebaldi, Edinaldo & Elmslie, Bruce, 2008. "Institutions, Innovation and Economic Growth," MPRA Paper 9683, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:9683
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    References listed on IDEAS

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    More about this item

    Keywords

    Institutions; innovation; human capital; economic growth;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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