The knowledge cost approach to productivity growth

This paper presents the knowledge cost approach as a comprehensive framework to account for productivity growth based upon the analysis of the twin effects of limited appropriability on both knowledge price and cost. The knowledge cost approach stresses the effects of the limited appropriability of knowledge on both its derived demand and supply after taking into account the localized, idiosyncratic and contextual activities required to absorb and use the knowledge available in the system. When the twin effects of limited appropriability are jointly taken into account, it is clear that knowledge costs and prices fall below standard equilibrium levels, allowing the use of that knowledge in the technology production function to contribute to higher total factor productivity growth rates.