Peter Howitt

Peter Howitt
Brown University · Department of Economics

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45
Publications
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17,868
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Publications

Publications (45)
Chapter
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Article
In this paper we introduce capital accumulation in the Schumpeterian growth framework. A first main result is that capital accumulation and innovation are both essential inputs to long-run growth. More innovation stimulates capital accumulation by raising the marginal product of capital. More capital accumulation stimulates innovation by raising th...
Article
Full-text available
This paper is an exploratory analysis of the role that banks play in supporting what Jevons called the “mechanism of exchange.” It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the part of the Walrasian auctioneer,...
Article
Full-text available
We use an agent-based computational approach to show how inflation can worsen macroeconomic performance by disrupting the mechanism of exchange in a decentralized market economy. We find that, in our model economy, increasing the trend rate of inflation above 3% has a substantial deleterious effect, but lowering it below 3% has no significant macro...
Article
By operationalizing the notion of creative destruction, Schumpeterian growth theory generates distinctive predictions on important microeconomic aspects of the growth process (competition, firm dynamics, firm size distribution, cross-firm and cross-sector reallocation) which can be confronted using rich micro data. In this process the theory helps...
Article
In this review, we argue that the Schumpeterian growth paradigm, which models growth as resulting from innovations involving creative destruction, sheds light on several aspects of the growth process that cannot be properly addressed by alternative theories. We focus on three important aspects for which Schumpeterian growth theory delivers predicti...
Article
This paper analyses the relationship between trade liberalization and economic growth using a Schumpeterian framework of technological innovation and applies it to sector-level South African data. The framework examines direct and indirect effects of trade liberalization on productivity growth. Indirect impacts operate through a differential impact...
Article
Schumpeterian growth theory has “operationalized” Schumpeter’'s notion of creative destruction by developing models based on this concept. These models shed light on several aspects of the growth process which could not be properly addressed by alternative theories. In this survey, we focus on four important aspects, namely: (i) the role of competi...
Article
Can patent protection and product market competition complement each other in enhancing incentives to innovate? In this paper, we address this question by investigating how innovation responses to a substantial policy initiative increasing product market competition interact with the strength of patent rights. We provide empirical evidence of innov...
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This paper emphasizes the importance of considering the mechanisms that coordinate economic transactions in a decentralized economy, namely the role played by a self-organizing network of entrepreneurial trading firms, for theories aimed at guiding macroeconomic policy. We review a research program that aims to understand how, and how well, trading...
Article
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This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose a unified framework that encompasses the growth effects of both the rate of improvement of health and the level of health. Based on cross-country regressions over the period 1960-2000, where we instrument for both variables, we fin...
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The benefits of health: an insight from endogenous growth theory This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose a unified framework that encompasses the growth effects of both, the accumulation and the level of health. Based on cross-country regressions where we instrument for...
Article
Can a country grow faster by saving more? We address this question both theoretically and empirically. In our theoretical model, growth results from innovations that allow local sectors to catch up with frontier technology. In poor countries, catching up requires the cooperation of a foreign investor who is familiar with the frontier technology and...
Article
How does firm entry affect innovation incentives in incumbent firms? Microdata suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced industries, but not in laggard industries. In this paper we pro...
Book
This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully acces...
Chapter
Endogenous growth theory explains long-run growth as emanating from economic activities that create new technological knowledge. This article sketches the outlines of the theory, especially the ‘Schumpeterian’ variety, and briefly describes how the theory has evolved in response to empirical discoveries.
Article
To sustain growth, Canada must engage in a never-ending process of economic development and transformation. To do so, new growth theory indicates that Canada should ensure that competition policy boosts innovation, beware of further extending patent protection, and welcome international trade and technological change.
Article
Full-text available
Can a country grow faster by saving more? We address this question both theoretically and empirically. In our model, growth results from innovations that allow local sectors to catch up with the frontier technology. In relatively poor countries, catching up with the frontier requires the involvement of a foreign investor, who is familiar with the f...
Article
This paper considers how competition can affect aggregate innovative activity through its effects on firms' decision whether or not to vertically integrate. A moderate increase in competition enhances innovation incentives and too much competition discourages innovative effort. These effects generate an inverted-U relationship between competition a...
Article
Full-text available
How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries - incumbents in technologically advanced industries react positively to entry, but not in laggard industries. To explain this pattern, we introduce entry into a Schumpeterian growth model wit...
Article
Full-text available
This paper investigates the relationship between product market competition (PMC) and innovation. A growth model is developed in which competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. There are four key predictions. First, the relationship between pro...
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Full-text available
We introduce imperfect creditor protection in a multicountry Schumpeterian growth model. The theory predicts that any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier, and that all other countries will have a strictly lower long-run growth rate. We present evidence...
Article
We use Schumpeterian growth theory to account for the divergence in per-capita income that has taken place between countries since the mid-19th century, as well as for the convergence that took place amongst the richest countries during the second half of the 20th century. The argument is based on the premise that technological change underwent a f...
Article
This paper investigates the relationship between product market competition and innovation. It uses the radical policy reforms in the UK as instruments for changes in product market competition, and finds a robust inverted-U relationship between competition and patenting. It then develops an endogenousm growth model with step-by-step innovation tha...
Article
How does entry affect productivity growth of incumbents? In this paper we exploit policy reforms in the United Kingdom that changed entry conditions by opening up the U.K. economy during the 1980s and panel data on British establishments to shed light on this question. We show that more entry, measured by a higher share of industry employment in fo...
Article
Full-text available
This paper investigates the relationship between product market competition (PMC) and innovation. A growth model is developed in which competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. There are four key predictions. First, the relationship between pro...
Article
Book description: Traditionally, economists have considered the accumulation of conventional inputs such as labor and capital to be the primary force behind economic growth. Now, however, many macroeconomists place technological progress at the center of the growth process. This shift is due to new theoretical developments that allow researchers to...
Article
Recent empirical work has pointed to a positive correlation between product market competition and productivity growth. In this lecture we try to reconcile this evidence with the Schumpterian growth paradigm. Three alternative explanations are successively considered, respectively based upon agency considerations, the tacit nature of knowledge, and...
Book
Advanced economies have experienced a tremendous increase in material well-being since the industrial revolution. Modern innovations such as personal computers, laser surgery, jet airplanes, and satellite communication have made us rich and transformed the way we live and work. But technological change has also brought with it a variety of social p...
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Book description: This collection offers a stimulating and insightful overview of the main issues affecting long-term economic growth. The novelty of this book is that it brings together two strands of economic literature, growth and development theories. The communication between different approaches is crucial as it is increasingly understood tha...
Article
RÉSUMÉ Cet article examine les effets macroéconomiques résultant de l’introduction de ce que Bresnahan et Trajtenberg appellent une « technologie multi-usages » (TMU) comme, par exemple, la technologie informatique. L’analyse est basée sur le principe qu’une nouvelle TMU accélère le rythme de changement technologique en créant une vague d’innovatio...
Article
A model of endogenous growth is developed in which growth is driven by vertical innovations that involve creative destruction. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends negatively upon the amount expected next period. The paper analyzes positive and normative...
Article
The extent to which xed factors of production such as land constrain per-capita income growth has been a widely discussed topic in economics since at least Malthus (1798). Whether xed factors limit growth depends crucially on two variables: the substitutability of xed factors in production, and the extent to which innovation will be biased towards...
Article
This paper develops a theoretical model to analyse how the arrival of a new technology embodied in capital affects the variability of earnings when workers' adaptability to new technologies is subject to random events (luck) that can be history dependent. It is argued that technological change can leverage the importance of these stochastic factors...

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