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Macrodynamic Modeling of Innovation Equilibria and Traps

  • Edgar J. Sanchez-Carrera ORCID logo EMAIL logo , Sebastian Ille and Giuseppe Travaglini
Published/Copyright: May 14, 2021

Abstract

We study the interplay between the decision of firms to innovate and human capital. Based on a dynamic evolutionary model, we show that in the presence of a high stock of human capital, an advanced economy can remain caught in an “innovation trap”. Following the literature on endogenous growth, R&D investments and human capital are modeled as strategic complements. Skilled workers increase productivity and enjoy a wage premium if they are employed in the R&D sector, while they receive the same wage as unskilled workers if they are employed in the production sector. We model the evolutionary dynamics of the share of innovative firms and human capital to determine the conditions under which an economy converges to a high, low or mixed state of innovation.

JEL Classification: C73; E20; I25; O12; O30; O43

Corresponding author: Edgar J. Sanchez-Carrera, Department of Economics, Society, and Politics, The University of Urbino Carlo Bo, Italy, E-mail:

Funding source: Università degli Studi di Urbino Carlo Bo

Award Identifier / Grant number: Unassigned

Acknowledgments

We benefitted from discussions and comments from Costas Azariadis, Samuel Bowles, Gian Italo Bischi, Giorgio Calcagnini, Oded Galor, Mauro Gallegati, Laura Gardini, Germana Giombini, Lawrence Katz, Davide Ticchi, Laura Veldkamp, and Ping Wang. We also thank seminar participants at: MDEF 2018, 10th Workshop Modelli Dinamici in Economia e Finanza -Dynamic Models in Economics and Finance at the University of Urbino Carlo Bo, and The Workshop on Non-linear Dynamics in Economics and Finance (2018) at the Facolta di Economia, Universita Politecnica delle Marche. This research work has been developed in the framework of the research project on “Models of behavioral economics for sustainable development” supported by DESP-University of Urbino. The usual disclaimer applies.

  1. Conflict of Interest Statement: The authors declare that they have no conflict of interest.

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Received: 2020-12-02
Revised: 2021-03-27
Accepted: 2021-04-26
Published Online: 2021-05-14

© 2021 Walter de Gruyter GmbH, Berlin/Boston

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