Policy implications of endogenous growth models: A Note

In this note we analyse the effect of an increase in the amount of resources devoted to research within a general R&D growth model. We show that the initial effect of this increase is independent of whether the spill-over in R&D is linear or not. Even after two decades along a transitional growth path the direction as well as the magnitude of this effect on the rate of growth is very similar. Thus, linear spill-over models could be interpreted as a proxy for the transitional behaviour of non-linear spill-over models. If we consider transitional dynamics to be relevant, linear spill-over models could be reasonable descriptions of real world growth processes.