Product Market Competition, R&D Effort and Economic Growth

Empirical evidence has recently pointed to the lack of any relationship between R&D intensity (variously defined and measured) and economic growth in the post-war period in the United States and other OECD countries. Using a framework that integrates human capital accumulation and purposive (horizontal) innovation activity, this paper looks at product market competition as a possible solution to this puzzle. Indeed, we find that changes in product market competition may well have no influence on human capital investment (the growth engine), while affecting R&D effort.