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CEU Economic Seminar Series: Structural Transformation in Innovation

Martí Mestieri
Wednesday, March 8, 2023, 11:15 am – 12:30 pm

 Martí Mestieri (Barcelona School of Economics and Universitat Pompeu Fabra), who will present “Structural Transformation in Innovation" (the paper is joint with Diego Comin and Danial Lashkari).

Time and venue: March 8, Wednesday, 11.15am – 12.30pm, in QS C-322. RSVP here.

 Abstract: We document structural change in innovation using historical patent data from the 1850s and R&D expenditure and TFP growth since 1947. Innovation moved from agricultural sectors to manufacturing and subsequently to services. To account for this structural change in innovation, we develop a multi-sector endogenous growth model in which the direction of innovation evolves endogenously. The model provides a general equilibrium framework that incorporates innovation's classical demand-pull and technology-push drivers. Sectors differ in innovation technologies and how much they benefit from knowledge spillovers (technology push). Due to nonhomotheticity in demand, relative sectors’ market sizes move towards income-elastic sectors along the growth process (demand pull). A robust prediction is that the innovation growth rate is asymptotically higher in more income-elastic sectors. A calibrated version of our model can account for the joint structural change in innovation and sectoral output observed in the US. Our framework can also be used to assess future paths of sectoral productivity (to evaluate the potential extent of Baumol’s disease) and optimal innovation policy.