Chris Laincz, Marios Zachariadis, and an anonymous referee provided helpful comments and suggestions. We also thank Chad Jones for his constructive criticisms.
Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory
Version of Record online: 8 JUN 2007
Journal of Money, Credit and Banking
Volume 39, Issue 4, pages 733–774, June 2007
How to Cite
HA, J. and HOWITT, P. (2007), Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory. Journal of Money, Credit and Banking, 39: 733–774. doi: 10.1111/j.1538-4616.2007.00045.x
- Issue online: 8 JUN 2007
- Version of Record online: 8 JUN 2007
- Received January 24, 2006; and accepted in revised form June 26, 2006.
- endogenous growth;
- Schumpeterian growth model;
- semi-endo-genous growth model;
- product proliferation;
- time-series test
This paper argues that long-run trends in R&D and TFP are more supportive of fully endogenous “Schumpeterian” growth theory than they are of semi-endogenous growth theory. The distinctive prediction of semi-endogenous theory that sustained TFP growth requires sustained growth of R&D input is not supported by co-integration tests and forecasting exercises, as TFP growth has been stationary even though the growth rate of R&D input has fallen three-fold since the early 1950s. In contrast, the prediction of Schumpeterian theory that sustained TFP growth requires a sustained fraction of GDP to be spent on R&D is not contradicted by similar tests.