Vahagn Jerbashian: “Economic growth theory delivers answers to fascinating relevant questions”
The UB School of Economics will host the Summer School “The Economics of Growth: Innovation, Rivalry, and Institutions” on July 1-5, 2019. Vahagn Jerbashian is the Academic Coordinator for this summer programme. The course will be taught by Professor Pietro F. Peretto from Duke University, a leading researcher in economic growth theory, and Vahagn, who is an assistant professor at the Department of Economics at the University of Barcelona. In this interview, Vahagn takes us inside the upcoming summer school and explains the importance of economic growth theory in today’s world.
Innovation, patents, licensing… These are words that we all hear about in the news. However, less people have heard about economic growth theory. What is it and why is it important?
Economic growth theory is a fascinating subject which attempts to deliver answers to a very important and, at the same time, very difficult question: Why are there differences in economic well-being across nations? What does this have to do with innovation, patents, and licensing? Actually, it has to do a lot with it. Robert Solow has showed that most of the difference in economic well-being across nations can be attributed to differences in total factor productivity in his seminal works from the 1950s. Innovation is thought to be one of the most important factors which affects total factor productivity. A large part of innovation is conducted by firms for their benefit. Patents and patent licensing, in-turn, determine the distribution of the rents accrued on innovation. Therefore, they affect the incentives for innovation and, as an outcome, they affect total factor productivity.
Do you think that we can gain a critical understanding of our world today through the lens of the modern growth theory?
Innovation and growth go hand in hand, and a very significant part of innovation is carried by large firms. Perhaps, good examples of these are Amazon, Apple, Google, IBM, Pfizer, Monsanto, etc. Why did Google innovate and introduce Android operating system? Why does it continue innovating and introducing ever more improved versions of it? A general claim can be that all these firms innovate to maximize their profits and value. Their innovations are aimed at creation of new products for new markets, and improving the existing products and their production processes. Modern growth theory explores how market interactions and knowledge transfers among these firms affect their incentives to innovate and innovative performance, in general.
How and when did you become interested in economic growth theory?
I got interested in growth theory during my PhD studies in Economics. This is a very interesting subject which delivers answers to fascinating and very ambitious questions. It establishes links between, for example, the market conduct of firms, technological change, and economic growth. It explores how government regulations can affect the market and innovative performance of the firms.
What kind of content participants can expect to find in your section of the Summer School 2019?
The first part of the Summer School 2019 will cover the foundations of modern growth theory. Together with the attendees, we will first look at very influential works by Paul Romer, Phillip Aghion and Peter Howitt from the beginning of the 90s. These works explore the link between economic growth and firm-level innovation, which creates new products and enables entry into a market. Afterwards, we will consider a framework by Pietro Peretto and Sjak Smulders where firms engage in in-house innovation, which improves their production process and the quality of their products. This type of innovation is more prevalent and has been the focus of many studies in industrial organization. We will also test certain hypotheses and implications of all these frameworks.
What methodology of teaching do you plan to use during the course?
My plan is to have student-centered experience where the participation of attendees during classes is strongly encouraged. During our classes we will cover both theoretical and empirical results. The discussion of the intuition behind these results and attendees’ feedback will be at the heart of our classes.
The Summer School has a truly international audience. What is the programme’s approach to teaching in this multicultural context with participants from different academic backgrounds?
Indeed, we can expect to have a very multicultural environment during the summer school and very different backgrounds among the attendees. It will be of an utmost interest to try to adjust the delivery of the material of the summer school in a way that it becomes the most suitable to the needs and backgrounds of the attendees.
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