Working Papers

March 1998, No. 98-1

External vs. Internal Learning-by-Doing in an R&D Based Growth Model

Andreas Hornstein and Dan Peled

In an economy where growth is determined by the interaction of R&D and learning-by-doing (LBD), changes of factors that stimulate either one of these activities affect growth differently than in an economy where growth is determined by either R&D or LBD alone. In particular, when firms anticipate that R&D for new types of goods threatens the future efficiency gains which they derive from LBD, a more efficient learning process or a larger workforce might reduce rather than increase the growth rate on a balanced growth path.

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