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June 10, 2019

New Insights into How Market Size Affects Innovation and Growth

Chief Scientific Adviser Kiminori Matsuyama recently made presentations in Tokyo that shed new light on how market size influences the rate of innovation and growth in an economy.

Matsuyama spoke at the University of Tokyo and Keio University on May 29 and 30, respectively, on the topic of “Reconsidering the Market Size Effect in Innovation and Growth.”

While the standard R&D-based endogenous growth model assumes that a larger country innovates more and grows faster when there is homotheticity of preferences, he showed that by holding the aggregate market size fixed, there will be greater innovation and growth in a country with higher per capita expenditure under empirically relevant cases, even if its population is smaller.

The University of Tokyo presentation was held as part of the Tokyo Workshop on International and Development Economics (TWID) 2019, while the Keio workshop was organized by the university’s Institute for Economic Studies. Both presentations were made in English.

 

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