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INTEL ECONOMICS *
Author(s) -
Segerstrom Paul S.
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00425.x
Subject(s) - subsidy , economics , endogenous growth theory , microeconomics , market economy , human capital
This article presents an endogenous growth model that is designed to be roughly consistent with the experience of high‐tech firms like Intel. In the model, industry leaders invest in R&D to improve their products, small firms invest in R&D to become industry leaders, and innovating becomes progressively more difficult over time. Consistent with the empirical evidence, the model implies that economic growth is independent of economy size and R&D intensity is independent of firm size. For plausible parameter values, it is optimal to heavily subsidize R&D activities.