Chapter10_EndogenousGrowth_032409

Chapter10_EndogenousGrowth_032409 - Endogenous Growth Model...

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Endogenous Growth Model Duke University and Federal Reserve Bank of Atlanta March 24, 2009 Endogenous Growth Model March 24, 2009 1 / 47
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A Theory of Technological Progress Remember from the Neoclassical growth model: g = A t + 1 A t A t = y t + 1 y t y t Growth depends on technological progress. Good thing: now we know where to look at. Challenge: we need a theory of technological progress. Big contribution of growth literature over the last two decades. Endogenous Growth Model March 24, 2009 2 / 47
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Ideas as Engine of Growth Technology: the way inputs to the production process are transformed into output. Technological progress due to new ideas: 1 Products. 2 Managerial practices. 3 Business models. Why (and under what circumstances) are resources are spent on the development of new ideas? Endogenous Growth Model March 24, 2009 3 / 47
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Historians of Science versus Economists Many historians of science focus on the autonomous role of science in However, economists emphasize the role of pro²t. Classical study of Schmokler ( Invention and Economic Growth , 1963): innovation is determined by the size of the market. Examples: 1 Horseshoe, many innovations in the late XIXth century and early XXth century, stop afterwards. 2 Drugs for Malaria versus drugs for male impotence. Juan Rubio-Ram³rez (DUKE) Endogenous Growth Model March 24, 2009 4 / 47
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Ideas What is an idea? What are the basic characteristics of an idea? 1 Ideas are nonrivalrous goods. 2 Ideas are, at least partially, excludable . Endogenous Growth Model March 24, 2009 5 / 47
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Di/erent Types of Goods 1 Rivalrous goods that are excludable: almost all private consumption goods, such as food, apparel, consumer durables fall into this group. 2 Rivalrous goods that have a low degree of excludability: tragedy of the commons. 3 Nonrivalrous goods that are excludable: most of what we call ideas falls under this point. 4 Nonrivalrous and nonexcludable goods: these goods are often called public goods. Endogenous Growth Model March 24, 2009 6 ± 47
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Examples of Di/erent Goods Endogenous Growth Model March 24, 2009 7 ± 47
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Nonrivalrousness: implies that cost of providing the good to one more consumer, the marginal cost of this good, is constant at zero. Production process for ideas is usually characterized by substantial development. Existence of intellectual property rights like patent or copyright laws are crucial for the private development of new ideas. Juan Rubio-Ram±rez (DUKE)
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This note was uploaded on 05/13/2010 for the course ECON 110D taught by Professor Schmitt-grohe during the Spring '08 term at Duke.

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Chapter10_EndogenousGrowth_032409 - Endogenous Growth Model...

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