The Refoundation of the Symmetric Equilibrium in Schumpeterian Growth Models

Abstract

We provide a refoundation of the symmetric growth equilibrium characterizing the research sector of vertical R&D-driven growth models. We argue that the usual assumptions made in this class of models leave the agents indifferent as to where targeting research: hence, the problem of the allocation of R&D investment across sectors is indeterminate. By introducing an ,-contamination of confidence in the expected distribution of R&D investment, we prove that the symmetric structure of R&D investment is the unique rational expectations equilibrium compatible with ambiguity-averse agents adopting a maxmin strategy. (C) 2006 Elsevier Inc. All rights reserved.