THE NEW GROWTH THEORY AND COASEAN ECONOMICS - INSTITUTIONS TO CAPTUREEXTERNALITIES

This paper presents the main theoretical arguments which lead many adh erents of the New Growth Theory to the conclusion that externalities i n research and development are important for economic growth and warra nt government subsidies. In contrast, the authors point to private ins titutions like associations, company structures and industry clusters which can capture such externalities. An international comparison of p rivate R&D investment and special features of institutions in Switzerl and and Japan are in line with this hypothesis. Thus, the argument for R&D subsidies made by the New Growth Theory is considerably reduced.