An uncertainty-based explanation of symmetric growth in Schumpeterian growth models

Cozzi, Guido ; Giordani, Paolo ; Zamparelli, Luca

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URN: urn:nbn:de:bsz:180-madoc-25822
Document Type: Working paper
Year of publication: 2006
The title of a journal, publication series: Working paper series / Sonderforschungsbereich 504, Rationalitätskonzepte, Entscheidungsverhalten und Ökonomische Modellierung
Volume: 06-08
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: D81 O41 O32,
Subject headings (SWD): Industrieforschung , Sektoraler Strukturwandel , Wachstumstheorie , Wirtschaftswachstum , Investition
Keywords (English): R&D-Driven Growth-Models , Multi-Prior Beliefs , Maxmin Strategy , Symmetric Equilibrium
Abstract: We provide a re-foundation of the symmetric growth equilibrium characterizing the research sector of all vertical R&D-driven growth models. This result does not rely on the usual assumption of a symmetric expectation on the future per-sector R&D expenditure. Indeed, with this structure of expectations, returns in R&D are equalized, and agents turn out to be indifferent as to where targeting research: hence, the problem of the allocation of R&D investments across sectors is indeterminate. In line with the ’true’ Schumpeterian perspective, we solve this indeterminacy by allowing for decision makers strictly uncertain about the future per-sector distribution of R&D efforts. By using the Gilboa-Schmeidler’s MEU decision rule, we prove that the symmetric structure of R&D investment is the unique rational expectations (RE) equilibrium compatible with uncertainty-averse agents adopting a maximin strategy.
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