R&D Spillovers in an Endogenous Growth Model with Physical Capital, Human Capital and Varieties

There is a family of models with Physical, Human capital and R&D for which convergence properties have been discussed (Arnold, 2000a; Gómez, 2005). However, spillovers in R&D have been ignored in this context. We introduce spillovers in this model and derive its steady-state and stability properties. This new feature implies that the model is characterized by a system of four differential equations. A unique Balanced Growth Path along with a two dimensional stable manifold are obtained under simple and reasonable conditions. Transition is oscillatory toward the steady-state for plausible values of parameters. JEL Classification: C62, O11, O41. Key-Words: convergence; stability; spillovers; R&D. ∗Departamento de Gestão e Economia, Universidade da Beira Interior and INOVA research center, Faculdade de Economia, Universidade Nova de Lisboa. (e-mail : [email protected]). I thank Robert Lucas, Ana Balcão Reis, participants in the ASSET 2007 conference in Padova (Italy) and in the fist conference of the Portuguese Economic Journal in Azores (Portugal) for useful comments. I gratefully acknowledge financial support from POCI/FCT Fundação para a Ciência e Tecnologia. The usual disclaimer applies. This paper has been accepted for publication and will appear in revised form in Macroeconomic Dynamics, published by Cambridge University Press.