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Title:Innovation and economic growth in two perspectives: Social capital and social protection policies
Author(s):Leite Estanislau do Amaral, Luiz Felipe
Director of Research:Amir-Ahmadi, Pooyan
Doctoral Committee Chair(s):Amir-Ahmadi, Pooyan
Doctoral Committee Member(s):Howard, Gregory; Krasa, Stefan; Perry, Martin
Department / Program:Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):economic growth
endogenous growth
social capital
interpersonal trust
social protection
barriers to technology adoption
Abstract:There is a wide consensus that, in the presence of diminishing returns to factor accumulation, economic growth can only be sustained by innovation and technological progress. Given this fact, this work examines the relationship between innovation and economic performance through two different perspectives. The first one is the effects of social capital on innovation and firm performance, while the second one is the interaction between innovation, social protection policies, and barriers to technology adoption. Following an introductory chapter, the second chapter begins from the assertion that social capital, in particular levels of interpersonal trust, is associated with higher levels of economic performance. Recent evidence shows that this effect is causal, but the mechanism through which this occurs is still unclear. The chapter then gauges the effect of trust on economic performance through market size, and research and development. It builds a model of endogenous growth that, in equilibrium, generates a positive association between interpersonal trust, labor supplied in the market, and the number of patent applications; and a negative association between interpersonal trust and the share of the labor force comprised of non-scientists and engineers. Then, it tests these results by exploiting the exogenous variation in culture caused by differences in past literacy rates and institutions within European countries. Social capital is found to have a positive and sizable causal effect on innovation output (patent applications), number of active firms, and persons employed; and a negative effect on the percentage of the labor force not comprised of scientists nor engineers. Given the theory presented, this is interpreted as evidence in favor interpersonal trust affecting economic outcomes through market sizes and R\&D. Then, a third chapter explores the relationship between social protection policies and innovation. If economic growth is caused by innovation, and social protection policies discourage entrepreneurship, how can some countries grow fast while maintaining a large social safety net? This chapter explorers theoretically and empirically the relationship between social protection policies, barriers to technology adoption, and total factor productivity (TFP) growth. It first introduces barriers to technology adoption and a moral hazard problem regarding entrepreneurs' efforts into a model of endogenous technological change. As a result, countries must choose only two out of three objectives: high economic growth rates, social protection, or protection from foreign competition through barriers to technology adoption. In addition, each type of policy has a differential effect on different components of TFP growth. I use a panel of countries to test whether these differential effects are supported by data. Generally, they are: social protection polices have a stronger effect on TFP growth net of knowledge spillovers, and barriers to technology adoption have a larger effect on overall TFP growth.
Issue Date:2020-12-03
Rights Information:Copyright 2020, Luiz Felipe Leite Estanislau do Amaral
Date Available in IDEALS:2021-03-05
Date Deposited:2020-12

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