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Advisor(s)
Abstract(s)
We extend the model presented in Barro and Sala-i-Martin (1997) by allowing for two types of economies - more developed and in transition to European Union integration - to both imitate and innovate varieties of intermediate goods. Besides depending on research and development expenditures, we also allow for the stochastic nature of innovation by making it also dependent on a random component. We do this by Monte Carlo simulation, using a Box-Muller process, and solve a three di erential equation model by using numerical methods. Two situations are presented: a leading economy with greater institutions and more labour than the transition economy versus a situation where an institutional advance is given to the transition economy.
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Keywords
Stochastic innovation Transition economies Growth Technology Diffusion Convergence
Pedagogical Context
Citation
Cerdeira, J., Rebelo, L. P. (2008). National Productive Structure and Innovative Dynamics: Finding the (Endogenous) Path to Convergence. Working Papers: Economics. N.º 1, 29 p.