Self-fulfilling prophecies in the quality ladders economy
Journal
Journal of Development Economics
ISSN
0304-3878
ISSN-Digital
1872-6089
Type
journal article
Date Issued
2007-09-01
Author(s)
Abstract
If R&D difficulty increases as it accumulates, as recent evidence suggests, then there is a value in the diversification of the aggregate R&D efforts over the whole range of industries in the economy. However, this paper proves that the quality ladders models allow for self-fulfilling prophecies to divert R&D from an arbitrary number of sectors, with potentially dramatic effects on the dynamics of industry structure and on the long-run aggregate growth performance. Moreover, in developing countries, perfect markets might allow stagnant monopolies to resist despite the removal of fundamental entry barriers to dynamic competition. This kind of coordination failure implies potentially strong effects of socio-cultural factors on growth and suggests a positive role for public R&D policy even in a framework of semi-exogenous growth.
Language
English
Keywords
Schumpeterian growth theory
vertical innovation
indeterminacy
industry structure and innovation
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
84
Number
1
Start page
445
End page
464
Pages
20
Subject(s)
Eprints ID
222064