Innovation, Decentralization, and Planning in a Multi-Region Model of Schumpeterian Economic Growth

Networks and Spatial Economics, Vol. 14, No. 3, pp. 605-628, 2014

Posted: 9 Dec 2014

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics; Tinbergen Institute

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Date Written: December 8, 2014

Abstract

We study innovation and the resulting Schumpeterian economic growth that this innovation gives rise to in a model with N heterogeneous regions. For each region i where i=1,...,N, our analysis leads to six findings. First, we define the balanced growth path (BGP) allocations and the equilibrium of interest. Second, we stipulate the form of the innovation possibilities frontier that is consistent with balanced economic growth. Third, we derive the growth rate of the ith region in the decentralized equilibrium. Fourth, we solve the social planner’s problem and derive the Pareto optimal growth rate in the ith region. Fifth, we compare the two preceding growth rates and then discuss the circumstances in which there is either too much or too little innovation in (i) the ith region, (ii) an aggregate economy of N>2 regions and (iii) an aggregate economy of N=2 regions. Sixth, we briefly discuss interregional trade and its effects in an aggregate economy of N=2 regions. Finally, we conclude and then offer suggestions for extending the research described here.

Keywords: Human Capital, Innovation, Multi-Region Economy, Schumpeterian Economic Growth

JEL Classification: R11, J24, O31

Suggested Citation

Batabyal, Amitrajeet A. and Nijkamp, Peter, Innovation, Decentralization, and Planning in a Multi-Region Model of Schumpeterian Economic Growth (December 8, 2014). Networks and Spatial Economics, Vol. 14, No. 3, pp. 605-628, 2014, Available at SSRN: https://ssrn.com/abstract=2535459

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology ( email )

Department of Economics, RIT
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Rochester, NY NEW YORK 14623-5604
United States
5853134063 (Phone)
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HOME PAGE: http://people.rit.edu/aabgsh

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446091 (Phone)
+31 20 4445611 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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