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Endogenous Technological Change

Paul Romer (University of Chicago)

National Bureau of Economic Research
DOI: 10.3386/w3210 (Economics, Econometrics and Finance)
License: not stated (all rights reserved)

Abstract: Growth in this model is driven by technological change that arises from intentional investment decisions made by profit maximizing agents.The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good.Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported, and instead, the equilibrium is one with monopolistic competition.The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

Published on 01 Dec. 1989