Leaders and Followers: Perspectives on the Nordic Model and the Economics of Innovation / Joseph E. Stiglitz.

By:

Stiglitz, Joseph E

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w20493.Publication details: Cambridge, Mass. National Bureau of Economic Research 2014.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper is an exercise in comparative institutional analysis, asking what kinds of arrangements most facilitate innovation. After identifying pervasive market failures in innovation, it explains why those associated with the Nordic model may be particularly conducive to innovation, and demonstrates that, in general, the optimal policies of the leader should differ from that of followers, but that both leaders and followers can benefit from active government policies (like industrial policies, public investments, and systems of social protection), not only leading to more innovation, but ensuring that more innovative activity is directed in ways that lead to the enhancement of living standards.Abstract: It concludes by constructing a simple model in which knowledge flows slowly across national borders but moves easily within borders. We show there is a leadership-followership equilibrium, in which some countries are leaders, others are followers. Contrary to Solow's analysis, there need not be convergence. Focusing on technological progress that is a result of learning by doing, where learning occurs within the industrial sector but spills over to other sectors, we demonstrate the optimality of policies to expand the industrial sector beyond that which prevails in competitive equilibrium.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w20493 (Browse shelf(Opens below))	Not For Loan

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September 2014.

This paper is an exercise in comparative institutional analysis, asking what kinds of arrangements most facilitate innovation. After identifying pervasive market failures in innovation, it explains why those associated with the Nordic model may be particularly conducive to innovation, and demonstrates that, in general, the optimal policies of the leader should differ from that of followers, but that both leaders and followers can benefit from active government policies (like industrial policies, public investments, and systems of social protection), not only leading to more innovation, but ensuring that more innovative activity is directed in ways that lead to the enhancement of living standards.

It concludes by constructing a simple model in which knowledge flows slowly across national borders but moves easily within borders. We show there is a leadership-followership equilibrium, in which some countries are leaders, others are followers. Contrary to Solow's analysis, there need not be convergence. Focusing on technological progress that is a result of learning by doing, where learning occurs within the industrial sector but spills over to other sectors, we demonstrate the optimality of policies to expand the industrial sector beyond that which prevails in competitive equilibrium.