Paper #831

Title:

Horizontal innovation in the theory of growth and development

Authors:

Gino Gancia and Fabrizio Zilibotti

Date:

January 2005

Abstract:

We analyze recent contributions to growth theory based on the model of expanding variety of Romer (1990). In the first part, we present different versions of the benchmark linear model with imperfect competition. These include the “labequipment” model, labor-for-intermediates” and “directed technical change”. We review applications of the expanding variety framework to the analysis of international technology diffusion, trade, cross-country productivity differences, financial development and fluctuations. In many such applications, a key role is played by complementarities in the process of innovation.

Keywords:

appropriate technology, complementarity, cycles, convergence, directed technical change, endogenous growth, expanding variety, financial development,imperfect competition, integration, innovation

JEL codes:

D92, E32, F12, F15, F43, G22, O11, O16, O31, O33

Area of Research:

Macroeconomics and International Economics

Published in:

Handbook of Economic Growth, Philippe Aghion and Steve Durlauf editors, 2005

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