Duplication externalities in an endogenous growth model with physical capital, human capital, and R&D

This paper devises an endogenous growth model with physical capital, human capital and product variety. Differently to previous works, innovation is subject to externalities associated to the duplication of research effort, as well as to R&D spillovers. We provide conditions for the existence of a unique feasible steady-state equilibrium with positive long-run growth. For appropriate parameter values, the transitional dynamics of the model is represented by a two-dimensional stable manifold. Numerical simulations show that the incorporation of duplication externalities significantly increases the ability of the model to fit the observed data.

Research highlights► An endogenous growth model with physical capital, human capital and R&D is devised. ► The transitional dynamics is represented by a two-dimensional stable manifold. ► Adding externalities associated to duplication of research increases the fit to data.