1932

Abstract

The nonrivalry of ideas gives rise to increasing returns, a fact celebrated in Paul Romer's recent Nobel Prize. An implication is that the long-run rate of economic growth is the product of the degree of increasing returns and the growth rate of research effort; this is the essence of semi-endogenous growth theory. This review interprets past and future growth from a semi-endogenous perspective. For 50+ years, US growth has substantially exceeded its long-run rate because of rising educational attainment, declining misallocation, and rising (global) research intensity, implying that frontier growth could slow markedly in the future. Other forces push in the opposite direction. First is the prospect of “finding new Einsteins”: How many talented researchers have we missed historically because of the underdevelopment of China and India and because of barriers that discouraged women inventors? Second is the longer-term prospect that artificial intelligence could augment or even replace people as researchers. Throughout, the review highlights many opportunities for further research.

Loading

Article metrics loading...

/content/journals/10.1146/annurev-economics-080521-012458
2022-08-12
2024-07-15
Loading full text...

Full text loading...

/deliver/fulltext/economics/14/1/annurev-economics-080521-012458.html?itemId=/content/journals/10.1146/annurev-economics-080521-012458&mimeType=html&fmt=ahah

Literature Cited

  1. Acemoglu D, Aghion P, Bursztyn L, Hemous D. 2012. The environment and directed technical change. Am. Econ. Rev. 102:1131–66
    [Google Scholar]
  2. Acemoglu D, Autor D 2011. Skills, tasks and technologies: implications for employment and earnings. Handbook of Labor Economics, Vol. 4 O Ashenfelter, D Card 1043–171 Amsterdam: Elsevier
    [Google Scholar]
  3. Acemoglu D, Guerrieri V. 2008. Capital deepening and nonbalanced economic growth. J. Political Econ. 116:3467–98
    [Google Scholar]
  4. Acemoglu D, Restrepo P. 2018. The race between man and machine: implications of technology for growth, factor shares, and employment. Am. Econ. Rev. 108:61488–542
    [Google Scholar]
  5. Acemoglu D, Restrepo P. 2020. Robots and jobs: evidence from US labor markets. J. Political Econ. 128:62188–244
    [Google Scholar]
  6. Aghion P, Bergeaud A, Boppart T, Klenow PJ, Li H. 2019a. Missing growth from creative destruction. Am. Econ. Rev. 109:82795–822
    [Google Scholar]
  7. Aghion P, Howitt P. 1992. A model of growth through creative destruction. Econometrica 60:2323–51
    [Google Scholar]
  8. Aghion P, Jones BF, Jones CI 2019b. Artificial intelligence and economic growth. The Economics of Artificial Intelligence: An Agenda A Agrawal, J Gans, A Goldfarb 237–82 Chicago: Univ. Chicago Press
    [Google Scholar]
  9. Agrawal A, McHale J, Oettl A 2019. Finding needles in haystacks: artificial intelligence and recombinant growth. The Economics of Artificial Intelligence: An Agenda A Agrawal, J Gans, A Goldfarb 149–74 Chicago: Univ. Chicago Press
    [Google Scholar]
  10. Akcigit U, Kerr WR. 2018. Growth through heterogeneous innovations. J. Political Econ. 126:41374–443
    [Google Scholar]
  11. Alvarez FE, Buera FJ, Lucas RE. 2013. Idea flows, economic growth, and trade NBER Work. Pap. 19667
    [Google Scholar]
  12. Argente D, Hanley D, Baslandze S, Moreira S. 2020. Patents to products: product innovation and firm dynamics Work. Pap. 2020-4 Fed. Reserve Bank Atlanta Atlanta, GA:
    [Google Scholar]
  13. Arkolakis C, Lee SK, Peters M. 2020. European immigrants and the United States' rise to the technological frontier Work. Pap., Yale Univ. New Haven, CT:
    [Google Scholar]
  14. Arkolakis C, Ramondo N, Rodriguez-Clare A, Yeaple S 2018. Innovation and production in the global economy. Am. Econ. Rev. 108:82128–73
    [Google Scholar]
  15. Arrow KJ. 1962. The economic implications of learning by doing. Rev. Econ. Stud. 29:153–73
    [Google Scholar]
  16. Atkeson A, Burstein A. 2019. Aggregate implications of innovation policy. J. Political Econ. 127:62625–83
    [Google Scholar]
  17. Atkeson A, Burstein A, Chatzikonstantinou M. 2019. Transitional dynamics in aggregate models of innovative investment. Annu. Rev. Econ. 11:273–301
    [Google Scholar]
  18. Autor D, Dorn D, Hanson GH, Pisano G, Shu P. 2020. Foreign competition and domestic innovation: evidence from US patents. Am. Econ. Rev. Insights 2:3357–74
    [Google Scholar]
  19. Azoulay P, Graff Zivin JS, Li D, Sampat BN 2018. Public R&D investments and private-sector patenting: evidence from NIH funding rules. Rev. Econ. Stud. 86:1117–52
    [Google Scholar]
  20. Baumol WJ. 1967. Macroeconomics of unbalanced growth: the anatomy of urban crisis. Am. Econ. Rev. 57:415–26
    [Google Scholar]
  21. Bell AM, Chetty R, Jaravel X, Petkova N, Van Reenen J. 2019. Who becomes an inventor in America? The importance of exposure to innovation. Q. J. Econ. 134:2647–713
    [Google Scholar]
  22. Benhabib J, Perla J, Tonetti C 2021. Reconciling models of diffusion and innovation: a theory of the productivity distribution and technology frontier. Econometrica 89:52261–301
    [Google Scholar]
  23. Bils M, Klenow PJ. 2000. Does schooling cause growth?. Am. Econ. Rev. 90:1160–83
    [Google Scholar]
  24. Bils M, Klenow PJ, Ruane C. 2020. Misallocation or mismeasurement? NBER Work. Pap. 26711
    [Google Scholar]
  25. Bloom N, Jones CI, Van Reenen J, Webb M 2020. Are ideas getting harder to find?. Am. Econ. Rev. 110:41104–44
    [Google Scholar]
  26. Bloom N, Schankerman M, Van Reenen J. 2013. Identifying technology spillovers and product market rivalry. Econometrica 81:41347–93
    [Google Scholar]
  27. Bricker D, Ibbitson J. 2019. Empty Planet: The Shock of Global Population Decline. New York: Crown
    [Google Scholar]
  28. Brouillette JF. 2021. Women inventors and economic growth Work. Pap., Stanford Univ. Stanford, CA:
    [Google Scholar]
  29. Budish E, Roin BN, Williams H. 2015. Do firms underinvest in long-term research? Evidence from cancer clinical trials. Am. Econ. Rev. 105:72044–85
    [Google Scholar]
  30. Buera FJ, Lucas RE. 2018. Idea flows and economic growth. Annu. Rev. Econ. 10:315–45
    [Google Scholar]
  31. Buera FJ, Oberfield E. 2020. The global diffusion of ideas. Econometrica 88:183–114
    [Google Scholar]
  32. Carroll L. 2019. Through the Looking Glass. N.p.: SDE Class.
    [Google Scholar]
  33. Cozzi G. 2020. Semi-endogenous or fully endogenous growth? Both essential, one survives Work. Pap., Univ. St. Gallen, St. Gallen Switz:.
    [Google Scholar]
  34. Davidson T. 2021. Could advanced AI drive explosive economic growth?. Open Philanthropy June 25. https://www.openphilanthropy.org/could-advanced-ai-drive-explosive-economic-growth
    [Google Scholar]
  35. Dinopoulos E, Thompson P. 1998. Schumpeterian growth without scale effects. J. Econ. Growth 3:4313–35
    [Google Scholar]
  36. Eaton J, Kortum SS. 1996. Trade in ideas patenting and productivity in the OECD. J. Int. Econ. 40:3–4251–78
    [Google Scholar]
  37. Eaton J, Kortum SS. 1999. International technology diffusion: theory and measurement. Int. Econ. Rev. 40:537–70
    [Google Scholar]
  38. Eaton J, Kortum SS. 2002. Technology, geography, and trade. Econometrica 70:51741–79
    [Google Scholar]
  39. Eicher TS, Turnovsky SJ. 1999. Non-scale models of economic growth. Econ. J. 109:457394–415
    [Google Scholar]
  40. Engbom N. 2019. Firm and worker dynamics in an aging labor market Work. Pap., New York Univ. New York:
    [Google Scholar]
  41. Fernald JG, Jones CI. 2014. The future of US economic growth. Am. Econ. Rev. Pap. Proc. 104:544–49
    [Google Scholar]
  42. Frankel M. 1962. The production function in allocation and growth: a synthesis. Am. Econ. Rev. 52:995–1022
    [Google Scholar]
  43. Garcia-Macia D, Hsieh CT, Klenow PJ. 2019. How destructive is innovation?. Econometrica 87:51507–41
    [Google Scholar]
  44. Goldin C, Katz LF. 2008. The Race Between Education and Technology Cambridge, MA: Belknap Press
    [Google Scholar]
  45. Griliches Z. 1957. Hybrid corn: an exploration in the economics of technological change. Econometrica 25:4501–22
    [Google Scholar]
  46. Griliches Z 1984. R&D, Patents and Productivity Chicago: Univ. Chicago Press
    [Google Scholar]
  47. Grossman GM, Helpman E. 1989. Product development and international trade. J. Political Econ. 97:61261–83
    [Google Scholar]
  48. Grossman GM, Helpman E. 1991. Innovation and Growth in the Global Economy Cambridge, MA: MIT Press
    [Google Scholar]
  49. Grossman GM, Helpman E, Oberfield E, Sampson T. 2017. Balanced growth despite Uzawa. Am. Econ. Rev. 107:41293–312
    [Google Scholar]
  50. Growiec J. 2007. Beyond the linearity critique: the knife-edge assumption of steady-state growth. Econ. Theory 31:3489–99
    [Google Scholar]
  51. Hall BH, Jaffe A, Trajtenberg M. 2005. Market value and patent citations. RAND J. Econ. 36:116–38
    [Google Scholar]
  52. Hall BH, Mairesse J, Mohnen P 2010. Measuring the returns to R&D. Handbook of the Economics of Innovation, Vol. 2 BH Hall, N Rosenberg 1033–82 Amsterdam: North-Holland
    [Google Scholar]
  53. Hemous D, Olsen M. 2016. The rise of the machines: automation, horizontal innovation and income inequality Work. Pap., Univ. Zurich Zurich, Switz:.
    [Google Scholar]
  54. Herrendorf B, Rogerson R, Valentinyi A 2014. Growth and structural transformation. Handbook of Economic Growth, Vol. 2 P Aghion, SN Durlauf 855–941 Amsterdam: Elsevier
    [Google Scholar]
  55. Hopenhayn HA. 1992. Entry, exit, and firm dynamics in long-run equilibrium. Econometrica 60:51127–50
    [Google Scholar]
  56. Hopenhayn HA, Neira J, Singhania R. 2018. From population growth to firm demographics: implications for concentration, entrepreneurship and the labor share NBER Work. Pap. 25382
    [Google Scholar]
  57. Howitt P. 1999. Steady endogenous growth with population and R&D inputs growing. J. Political Econ. 107:4715–30
    [Google Scholar]
  58. Hsieh CT, Hurst E, Jones CI, Klenow PJ. 2019a. The allocation of talent and U.S. economic growth. Econometrica 87:51439–74
    [Google Scholar]
  59. Hsieh CT, Klenow PJ. 2009. Misallocation and manufacturing TFP in China and India. Q. J. Econ. 124:41403–48
    [Google Scholar]
  60. Hsieh CT, Klenow PJ, Nath IB. 2019b. A global view of creative destruction NBER Work. Pap. 26461
    [Google Scholar]
  61. Jones BF, Summers LH. 2020. A calculation of the social returns to innovation NBER Work. Pap. 27863
    [Google Scholar]
  62. Jones CI. 1995. R&D-based models of economic growth. J. Political Econ. 103:4759–84
    [Google Scholar]
  63. Jones CI. 2002. Sources of U.S. economic growth in a world of ideas. Am. Econ. Rev. 92:1220–39
    [Google Scholar]
  64. Jones CI 2005. Growth and ideas. Handbook of Economic Growth, Vol. 1B P Aghion, SN Durlauf 1063–111 Amsterdam: North-Holland
    [Google Scholar]
  65. Jones CI 2016. The facts of economic growth. Handbook of Macroeconomics, Vol. 2 JB Taylor, H Uhlig 3–69 Amsterdam: Elsevier
    [Google Scholar]
  66. Jones CI. 2020. The end of economic growth? Unintended consequences of a declining population NBER Work. Pap. 26651
    [Google Scholar]
  67. Jones CI, Kim J. 2018. A Schumpeterian model of top income inequality. J. Political Econ. 126:51785–826
    [Google Scholar]
  68. Judd KL. 1985. On the performance of patents. Econometrica 53:3567–85
    [Google Scholar]
  69. Kaldor N 1961. Capital accumulation and economic growth. The Theory of Capital F Lutz, D Hague 177–222 New York: St. Martin's Press
    [Google Scholar]
  70. Karahan F, Pugsley B, Sahin A. 2019. Demographic origins of the startup deficit NBER Work. Pap. 25874
    [Google Scholar]
  71. Klette TJ, Kortum S. 2004. Innovating firms and aggregate innovation. J. Political Econ. 112:5986–1018
    [Google Scholar]
  72. Kogan L, Papanikolaou D, Seru A, Stoffman N. 2017. Technological innovation, resource allocation, and growth. Q. J. Econ. 132:2665–712
    [Google Scholar]
  73. Kongsamut P, Rebelo S, Xie D. 2001. Beyond balanced growth. Rev. Econ. Stud. 68:4869–82
    [Google Scholar]
  74. Kortum SS. 1997. Research, patenting, and technological change. Econometrica 65:61389–419
    [Google Scholar]
  75. Kortum SS, Lerner J. 1998. Stronger protection or technological revolution: What is behind the recent surge in patenting?. Carnegie-Rochester Conf. Ser. Public Policy 48:1247–304
    [Google Scholar]
  76. Krugman PR. 1979. Increasing returns, monopolistic competition, and international trade. J. Int. Econ. 9:4469–79
    [Google Scholar]
  77. Li CW. 2000. Endogenous versus semi-endogenous growth in a two-R&D-sector model. Econ. J. 110:462C109–22
    [Google Scholar]
  78. Li CW. 2003. Endogenous growth without scale effects: comment. Am. Econ. Rev. 93:31009–17
    [Google Scholar]
  79. Lin HC, Shampine LF. 2018. R&D-based calibrated growth models with finite-length patents: a novel relaxation algorithm for solving an autonomous FDE system of mixed type. Comput. Econ. 51:1123–58
    [Google Scholar]
  80. Lucas RE Jr 1978. On the size distribution of business firms. Bell J. Econ. 9:508–23
    [Google Scholar]
  81. Lucas RE Jr 1988. On the mechanics of economic development. J. Monet. Econ. 22:13–42
    [Google Scholar]
  82. Lucas RE Jr., Moll B 2014. Knowledge growth and the allocation of time. J. Political Econ. 122:11–51
    [Google Scholar]
  83. Luttmer EG. 2011. On the mechanics of firm growth. Rev. Econ. Stud. 78:31042–68
    [Google Scholar]
  84. Melitz MJ. 2003. The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica 71:61695–725
    [Google Scholar]
  85. Mincer J. 1974. Schooling, Experience, and Earnings New York: Columbia Univ. Press
    [Google Scholar]
  86. Ngai LR, Pissarides CA. 2007. Structural change in a multisector model of growth. Am. Econ. Rev. 97:1429–43
    [Google Scholar]
  87. Ngai LR, Samaniego R. 2011. Accounting for research and productivity growth across industries. Rev. Econ. Dyn. 14:3475–95
    [Google Scholar]
  88. Nordhaus WD. 1969. An economic theory of technological change. Am. Econ. Assoc. Pap. Proc. 59:18–28
    [Google Scholar]
  89. OECD (Organ. Econ. Coop. Dev.) 2021. Main science and technology indicators. Data Set, Organ. Econ. Coop. Dev. Paris: accessed March 15, 2021. https://stats.oecd.org/Index.aspx?DataSetCode=MSTI_PUB
    [Google Scholar]
  90. Peretto PF. 1998. Technological change and population growth. J. Econ. Growth 3:4283–311
    [Google Scholar]
  91. Peretto PF, Seater JJ. 2013. Factor-eliminating technical change. J. Monet. Econ. 60:4459–73
    [Google Scholar]
  92. Perla J, Tonetti C 2014. Equilibrium imitation and growth. J. Political Econ. 122:152–76
    [Google Scholar]
  93. Perla J, Tonetti C, Waugh ME. 2021. Equilibrium technology diffusion, trade, and growth. Am. Econ. Rev. 111:173–128
    [Google Scholar]
  94. Peters M. 2019. Market size and spatial growth—evidence from Germany's post-war population expulsions Work. Pap., Yale Univ. New Haven, CT:
    [Google Scholar]
  95. Peters M, Walsh C 2021. Population growth and firm dynamics Work. Pap., Yale Univ. New Haven, CT:
    [Google Scholar]
  96. Phelps ES. 1966. Models of technical progress and the Golden Rule of Research. Rev. Econ. Stud. 33:2133–45
    [Google Scholar]
  97. Ramondo N, Rodriguez-Clare A, Saborio-Rodriguez M. 2016. Trade, domestic frictions, and scale effects. Am. Econ. Rev. 106:103159–84
    [Google Scholar]
  98. Redding SJ, Rossi-Hansberg E. 2017. Quantitative spatial economics. Annu. Rev. Econ. 9:21–58
    [Google Scholar]
  99. Restuccia D, Rogerson R. 2008. Policy distortions and aggregate productivity with heterogeneous plants. Rev. Econ. Dyn. 11:707–20
    [Google Scholar]
  100. Romer PM. 1990. Endogenous technological change. J. Political Econ. 98:5S71–102
    [Google Scholar]
  101. Sampson T. 2016. Dynamic selection: an idea flows theory of entry, trade, and growth. Q. J. Econ. 131:1315–80
    [Google Scholar]
  102. Sampson T. 2020. Technology gaps, trade and income Work. Pap., Lond. Sch. Econ London:
    [Google Scholar]
  103. Segerstrom P. 1998. Endogenous growth without scale effects. Am. Econ. Rev. 88:51290–310
    [Google Scholar]
  104. Sterk V, Sedlacek P, Pugsley B. 2021. The nature of firm growth. Am. Econ. Rev. 111:2547–79
    [Google Scholar]
  105. Trimborn T, Koch KJ, Steger TM. 2008. Multi-dimensional transitional dynamics: a simple numerical procedure. Macroecon. Dyn. 12:3301–19
    [Google Scholar]
  106. UN 2019. World Population Prospects 2019 Data Files, United Nations New York: https://population.un.org/wpp/
    [Google Scholar]
  107. US Bur. Labor Stat 2021. Multifactor productivity. U.S. Bureau of Labor Statistics. https://www.bls.gov/mfp/
    [Google Scholar]
  108. Young A. 1998. Growth without scale effects. J. Political Econ. 106:141–63
    [Google Scholar]
  109. Zeira J. 1998. Workers, machines, and economic growth. Q. J. Econ. 113:41091–117
    [Google Scholar]
/content/journals/10.1146/annurev-economics-080521-012458
Loading
/content/journals/10.1146/annurev-economics-080521-012458
Loading

Data & Media loading...

Supplementary Data

  • 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