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GTAP Resources: Resource Display

GTAP Resource #3512

"Promoting innovation and imitation in a small open economy: The role of human capital, R&D and trade"
by Bye, Brita and Taran FæHn

For small and open economies, absorption of knowledge spillovers from abroad can play a more important role for domestic growth than domestic innovations. However, there are interrelations between innovation and imitation processes, as they both depend on domestic investments in human capital and R&D, as well as trade. This article explores the implications for the desirable growth policy design when R&D policies, trade promotion and education simultaneously affect both innovation and absorption of knowledge spillovers from abroad. We employ a dynamic CGE model with endogeneous growth for the small and open economy, Norway. The contribution is to model empirical evidence of several simultaneous growth mechanisms and how they interplay in a macroeconomic framework. We take into account the two faces of R&D as well as of education. We analyse the impact of three different public revenue-neutral policy instruments; a general subsidy to R&D, a stimulation to trade in R&D-intensive technology, and public investments in education. We find approximately similar welfare effects of all the policy alternatives. But the industrial pattern and the relative roles of imitation and innovation processes for productivity growth and welfare differ. An R&D subsidy causes the R&D activity to expand considerably. This brings about positive externalities both through internal knowledge spillovers and productivity gains for users of R&D based capital. Absorption of spillovers from international technological development is also facilitated by the dispersion of R&D based capital domestically. Human capital has less absorptive capacity effects for most industries. The export promotion policy increases absorption of knowledge across borders in the R&D industry more, but this comes at the expense of absorption in most other industries. Education policies have a direct positive effect on R&D activity and the R&D expansion comes less at the expense of other human capital intensive industries.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Created: Bye, B. (4/8/2011)
Updated: Bye, B. (4/8/2011)
Visits: 1,171
- Economic growth
- Technological change
- Dynamic modeling
- Europe (Western)

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