Oscar Afonso

Growth and Firm Dynamics with Horizontal and Vertical R&D

This paper develops a tournament model of horizontal and vertical R&D under a lab-equipment specification. A key feature is that the overall growth rate is endogenous, as the splitting of the growth rate between the intensive and the extensive margin is itself endogenous. This setup gives rise to strong inter-R&D composition effects, while making economic growth and firm dynamics closely related, both along the balanced-growth path and transition. The model hence offers a (qualitative) explanation for the negative or insignificant empirical correlation between aggregate R&D intensity and both firm size and economic growth, a well-known puzzle in the growth literature.

Skill-biased technological knowledge without scale effects

In the skill-biased technological change literature, the technological-knowledge bias, which drives wage inequality, is determined by the market-size channel. Motivated by the literature on scale effects since Jones (1995a, b), the standard R&D technology is modified so that wage inequality results similarly from the technological-knowledge bias, which is instead induced by the price channel. Thus, by solving the transitional dynamics numerically, it is shown that the recent rise of the skill premium, which is highlighted by, e.g., Acemoglu (2002a), arises from the price-channel effect, complemented with a mechanism that can be called technological-knowledge-absorption effect.

A growth model for the quadruple helix

We develop a R&D-based growth model with productive public expenditure in order to frame the Quadruple Helix (QH) innovation concept, based on four helices: Academia & Technological Infrastructures , Firms , Government and Civil Society . Our motivation stems from acknowledgment that the relationship between these four helices and their joint impact on growth is in need of a theoretical framework. We aim to emphasise the importance to economic growth of innovation systems structured on these four helices. The introduced model confirms theoretically the notion that increases in: (i) complementarities between distinct productive units, or (ii) in productive government expenditure, lead to higher growth.

Fiscal Federalism in the European Union: How Far Are We?

Almost 60 years have gone by since Robert Schuman’s famous speech (Schuman, 1963), in which he described the ‘European federation’ as the ultimate goal of the integration process that was beginning at that time. However, the results of this process are clearly different for the two perspectives that comprise it: economics and politics.

Which manufacturing firms learn by exporting

Using a longitudinal database (1996–2003) at the plant level, this article analyses the causal nexus between international trade engagement and productivity in Portugal. By applying the propensity score matching and a differences-in-differences estimator, the learning-by-exporting hypothesis is analysed in particular. A higher growth of labour productivity and total factor productivity is found for new exporting firms. To uncover the channels through which the learning effects are driven, the same methodology is applied to some sub-samples. Learning effects are higher for new exporters that are also importers or start importing at the same time. Other factors affecting learning ability are found in firms exporting to more developed markets, in those that achieve a certain threshold of export intensity and mainly for those firms that belong to sectors where Portugal has a comparative disadvantage.

Institutions, Economics and the Development Quest

Institutions crucial for the analysis of how agents deal with uncertainty have been gaining increasing relevance on the economic research agenda. In this paper, we analyze the institutional literature aiming to explain why this perspective obtains better results than others in development economics. In particular, we stress the relevance of New Institutional Economics as an adequate framework for a broad understanding of development issues.

The effects of autocatalytic trade cycles on economic growth

In the first part of this paper the effects of trade cycles on economic growth are discussed to test the hypothesis of autocatalytic trade cycles, which indicates that more innovation is produced in countries that are a part of these cycles. Using United Nations data, a trade network is constructed and from this network, a set of variables that represent the participation of countries in trade cycles are constructed. A clear relation between these variables and economic growth is found. However, this relationship changes for different trade cycle sizes, categories of goods and time scales. Trade cycles also have a positive effect for the trade flows involved, although this effect differ significantly depending on the size of the trade cycle. The second part of the paper shows that the effects of trade cycles can be translated into policy recommendations. These conclusions strenghten existing literature but also add new insights to innovation policy and the pursuit of economic prosperity.

Technological-Knowledge Dynamics in Lab-Equipment Models of Quality Ladders

The Perpetual Inventory Model (PIM) assumes that, in each period, an arbitrary constant fraction of technological-knowledge stock is lost. We give a theoretical background to the PIM by showing that the technological-knowledge accumulation follows a dynamic process with an endogenous depreciation rate, which remains stable in steady state.

Innovation Economy, Productive Public Expenditure and Economic Growth

Multidisciplinary innovation is the main engine of growth for an increasing number of economies. Innovation requires the participation of and interaction between all economic agents. It also requires public spending on education, research and infrastructures. Our main goal is to emphasize the governments role in a growing innovation economy. Developing a non-scale, idea-based, one-sector growth model with complementarities and productive public expenditure, we analyse theoretically the growth effects of an increase in productive public expenditure, which we find positive in the short, medium and long run.

Dynamic political effects in a neoclassic growth model with healthcare and creative activities

This paper incorporates healthcare and creative activities in the Ramsey-Cass-Koopmans model in order to analyse the endogenous growth effects arising from governmental policies. An increase in lump-sum taxes and inefficient expenditures decrease the short, medium and the long-run economic growth.