Abstract
For several reasons, knowledge cannot be treated like any other commodity. One of these reasons is the non-confrontational nature of knowledge, which means that one person's use of certain knowledge does not diminish the relevance of another person's use of the same knowledge (at the same time). This important property of knowledge was used in several early models of R&D-based growth such as the researches of Romer (1990), Grossman and Helpman (1991), and Aghion and Howitt (1992). In these models this property leads to a scale effect, which boils down to larger economies growing faster than smaller economies (with the measure of size suitably defined (cf. Backus, Kehoe and Kehoe 1992)). In an influential paper, Jones (1995a) pointed out that growth with scale effects, as predicted by the early models of R&D-based growth, is inconsistent with empirical facts. Over the last 40 years the OECD countries have experienced a tremendous rise in the number of people involved in R&D activities whereas the growth rates of per-capita income have shown no corresponding increase.
