Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56846
Authors: 
Slavtchev, Viktor
Wiederhold, Simon
Year of Publication: 
2011
Series/Report no.: 
Jena economic research papers 2011,036
Abstract: 
This paper addresses the question of whether government procurement can work as a de facto innovation policy tool. We develop an endogenous growth model with quality-improving in-novation that incorporates industries with heterogeneous innovation sizes. Government de-mand in high-tech industries increases the market size in these industries and, with it, the in-centives for private firms to invest in R&D. At the economy-wide level, the additional R&D induced in high-tech industries outweighs the R&D foregone in all remaining industries. The implications of the model are empirically tested using a unique data set that includes federal procurement in U.S. states. We find evidence that a shift in the composition of government purchases toward high-tech industries indeed stimulates privately funded company R&D.
Subjects: 
public demand
technological change
endogenous growth
JEL: 
E62
H54
H57
O31
O32
O41
Document Type: 
Working Paper

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