As countries develop, the main driver of economic growth shifts from imitation to innovation. These two sources of growth require different policies and institutions. In particular, in this article we argue that the transition from an imitation-based to an innovation-based economy calls the old welfare state model into question. It is not so much the size of the state that is at stake but rather its governance. What we need to foster economic growth in developed economies is not a reduced state but a strategic state, which acts as a catalyst using selective and properly governed support to the market-driven innovation process. This idea of a strategic state that targets its investments to maximize growth in the face of hard budget constraints departs both from the Keynesian view of a state sustaining growth through demand-driven policies and from the neoliberal view of a minimal state confined to its regalian functions.


Article metrics loading...

Loading full text...

Full text loading...


Literature Cited

  1. Acemoglu D, Aghion P, Burzyn L, Hemous D. 2012. The environment and directed technical change. Am. Econ. Rev. 102:131–66 [Google Scholar]
  2. Acemoglu D, Aghion P, Lelarge C, Van Reenen J, Zilibotti F. 2007. Technology, information, and the decentralization of the firm. Q. J. Econ. 122:1759–99 [Google Scholar]
  3. Acemoglu D, Aghion P, Zilibotti F. 2006. Distance to frontier, selection, and economic growth. J. Eur. Econ. Assoc. 4:37–74 [Google Scholar]
  4. Acemoglu D, Akcigit U, Bloom N, Kerr W. 2013. Innovation, reallocation, and growth. NBER Work. Pap.18996 [Google Scholar]
  5. Acemoglu D, Robinson J. 2012. Why Nations Fail New York: Crown Bus. [Google Scholar]
  6. Aghion P, Akcigit U, Deaton A, Roulet A. 2013a. Creative destruction and subjective well-being. Unpublished manuscript, Harvard Univ., Cambridge, MA
  7. Aghion P, Akcigit U, Fernandez-Villaverde J. 2013b. Optimal capital versus labor taxation with innovation-led growth. NBER Work. Pap.19086 [Google Scholar]
  8. Aghion P, Alesina A, Trebbi F. 2008a. Democracy, technology and growth. Institutions and Economic Performance Helpman E. 511–43 Cambridge, UK: Cambridge Univ. Press [Google Scholar]
  9. Aghion P, Algan Y, Cahuc P. 2011. Can policy affect culture? Minimum wage and the quality of labor relations. J. Eur. Econ. Assoc. 9:3–42 [Google Scholar]
  10. Aghion P, Algan Y, Cahuc P, Shleifer A. 2010a. Distrust and regulation. Q. J. Econ. 125:1015–49 [Google Scholar]
  11. Aghion P, Angeletos M, Banerjee A, Manova K. 2010b. Volatility and growth: credit constraints and the composition of investment. J. Monet. Econ. 57:246–65 [Google Scholar]
  12. Aghion P, Bloom N, Blundell R, Griffith R, Howitt P. 2005. Competition and innovation: an inverted-U relationship. Q. J. Econ. 120:701–28 [Google Scholar]
  13. Aghion P, Blundell R, Griffith R, Howitt P, Prantl S. 2009. The effects of entry on incumbent innovation and productivity. Rev. Econ. Stat. 91:20–32 [Google Scholar]
  14. Aghion P, Dechezlepretre A, Hemous D, Martin R, Van Reenen J. 2012a. Carbon taxes, path dependency and directed technical change: evidence from the automotive industry. NBER Work. Pap. 18596 [Google Scholar]
  15. Aghion P, Dewatripont M, Stein J. 2008b. Academic freedom, private-sector focus, and the process of innovation. RAND J. Econ. 39:617–35
  16. Aghion P, Dewatripont M, Du L, Harrison A, Legros P. 2012b. Industrial policy and competition. NBER Work. Pap.18048 [Google Scholar]
  17. Aghion P, Dewatripont M, Hoxby C, Mas-Colell A, Sapir A. 2010c. The governance and performance of universities: evidence from Europe and the US. Econ. Policy 25:7–59 [Google Scholar]
  18. Aghion P, Farhi E, Kharroubi E. 2012c. Monetary policy, liquidity, and growth. NBER Work. Pap.18072 [Google Scholar]
  19. Aghion P, Hemous D, Kharroubi E. 2014. Cyclical fiscal policy, credit constraints, and industry growth. J. Monet. Econ. 62:41–58 [Google Scholar]
  20. Aghion P, Howitt P. 1992. A model of growth through creative destruction. Econometrica 60:323–51 [Google Scholar]
  21. Aghion P, Howitt P. 1998. Endogenous Growth Theory Cambridge, MA: MIT Press [Google Scholar]
  22. Aghion P, Howitt P. 2009. The Economics of Growth Cambridge, MA: MIT Press [Google Scholar]
  23. Aghion P, Meghir C, Vandenbussche J. 2006. Growth, distance to frontier, and composition of human capital. J. Econ. Growth 11:97–127 [Google Scholar]
  24. Aghion P, Murtin F. 2011. Comment ameliorer l'efficacite des depenses de sante? Unpublished manuscript, OECD, Paris
  25. Aghion P, Jaravel X, Persson T, Rouzet D. 2012d. Education and military rivalry. NBER Work. Pap. 18049
  26. Aghion P, Roulet A. 2011. Repenser l’Etat Paris: Ed. Seuil [Google Scholar]
  27. Algan Y, Cahuc P. 2010. Inherited trust and growth. Am. Econ. Rev. 100:2060–92 [Google Scholar]
  28. Arrow KJ. 1972. Gifts and exchanges. Philos. Public Aff. 1:343–62 [Google Scholar]
  29. Banerjee A, Duflo E. 2014. Under the thumb of history? Political institutions and the scope for action. Annu. Rev. Econ. 6: 951–71 [Google Scholar]
  30. Besley T, Persson T. 2009. The origins of state capacity: property rights, taxation, and politics. Am. Econ. Rev. 99:1218–44 [Google Scholar]
  31. Besley T, Persson T. 2011. Pillars of Prosperity: The Political Economics of Development Clusters. Princeton, NJ: Princeton Univ. Press
  32. Bloom N, Sadun R, Van Reenen J. 2012. The organization of firms across countries. Q. J. Econ. 127:1663–705 [Google Scholar]
  33. Boarini R, Cordoba J, Murtin F, Rippoll M. 2014. Beyond GDP: Is there a law of one shadow price? OECD Work. Pap., OECD, Paris
  34. Chetty R, Friedman J, Hilger N, Saez E, Schanzenbach D, Yagan D. 2011. How does your kindergarten classroom affect your earnings? Evidence from Project STAR. Q. J. Econ. 126:1593–660 [Google Scholar]
  35. Easterly W. 2005. National policies and economic growth: a reappraisal. Handbook of Economic Growth Vol. 1 Aghion P, Durlauf S. 1015–59 Amsterdam: North-Holland [Google Scholar]
  36. Guiso L, Sapienza P, Zingales L. 2004. The role of social capital in financial development. Am. Econ. Rev. 94:526–56 [Google Scholar]
  37. Guiso L, Sapienza P, Zingales L. 2006. Does culture affect economic outcomes?. J. Econ. Perspect. 20:223–48 [Google Scholar]
  38. Guiso L, Sapienza P, Zingales L. 2009. Cultural biases in economic exchanges. Q. J. Econ. 24:1095–131 [Google Scholar]
  39. Mian A, Rao K, Sufi A. 2013. Household balance sheets, consumption, and the economic slump. Q. J. Econ. 128:1687–726 [Google Scholar]
  40. Murray F, Aghion P, Dewatrapont M, Kolev J, Stern S. 2012. Of mice and academics: the role of openness in science. NBER Work. Pap.14819 [Google Scholar]
  41. Nunn N, Trefler D. 2010. The structure of tariffs and long-term growth. Am. Econ. J. Macroecon. 2:4158–94 [Google Scholar]
  42. Stiglitz J, Sen A, Fitoussi J-P. 2009. Report by the Commission on the Measurement of Economic Performance and Social Progress. Rep., Comm. Meas. Econ. Perform. Soc. Prog
  43. Tabellini G. 2008. Presidential address: institutions and culture. J. Eur. Econ. Assoc. 6:255–94 [Google Scholar]
  44. Tilly C. 1975. Reflection on the history of the European state-making. The Formation of National States in Western Europe Tilly C. 3–84 Princeton, NJ: Princeton Univ. Press [Google Scholar]
  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error