Capital and interest in horizontal innovation models

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


Horizontal innovation models have a common structure of three sequentially connected sectors. This structure-production of commodities by means of commodities-necessitates the compounding of interest on an input that goes through multiple production periods before the final good is produced. I argue that this aspect is missed (or deliberately assumed away) in typical horizontal innovation models and that this practice generates internal inconsistency in relation to the long run nature of the models. Though discussion is carried out in particular reference to Barro and Sala-i-Martin's 'lab-equipment' model, implications are general.

Original languageEnglish
Pages (from-to)755-772
Number of pages18
JournalCambridge Journal of Economics
Issue number4
Publication statusPublished - 2009 Nov 9

Bibliographical note

Funding Information:
Manuscript received 11 February 2008; final version received 15 September 2009. Address for correspondence: Department of Economics, Korea University, 1 Anam-dong, Seongbuk-gu, Seoul, 136–701, Korea; email: * Department of Economics, Korea University. Special thanks are due to colleagues in the Department of Economics, Korea University; in particular, Professors Sungjin Kang, Sunbin Kim and Kwanho Shin. Professors Heinz Kurz and Ian Steedman gave, as usual, helpful comments. This work was supported by the Korea Research Foundation (KRF) Grant funded by the Korean Government (MOEHRD) (KRF-2005-041-B00091).


  • Capital
  • Horizontal innovation models
  • Interest
  • Value

ASJC Scopus subject areas

  • Economics and Econometrics


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