| This dissertation investigates the determinants of the extent of technological change and its role in the process of economic growth. The first chapter identifies competition in research and development and in output markets as key determinants of the intensity of R&D efforts. These efforts are then shown to determine the pace of technological change and of industrial evolution. The extent of competition in an industry is endogenously derived and relationships between this variable and research efforts, prices and quantities produced, profitability, and input demands are derived. An empirical examination of some of these relationships is also undertaken. The second chapter develops a general equilibrium model of an economy with imperfect competition to study the relative roles played in the economic growth process by investments in physical capital and in R&D. Even when competitive forces prevent the implementation of the results of most of the research that takes place, it is shown that the long run rate of economic growth is positively dependent on both the extent of competition and firm research intensities. These variables, and therefore the rate of economic growth, are demonstrated to be affected by fiscal policy. A reduction of government, with lower wage taxes, is shown to increase competition and research intensities leading to a higher growth rate in the steady state. However, the immediate impact of such a policy is demonstrated to be in the opposite direction, with a prolonged period of lower growth rates of output and capital during a transition phase. The third chapter examines the externality generated by newly created goods on research efforts. This positive externality, in the form of a knowledge spillover, is shown to be vital to obtain sustained growth. The presence of even tiny imitation costs and strong price competition are shown to preclude such spillovers and thereby bring growth to a halt. Government through a tax-subsidy system aimed at disseminating newly created knowledge can, however, revive economic growth. The optimal level of such a tax scheme, in terms of maximizing the rate of economic growth, is derived and characterized. |
