growth6 - Part IIB. Paper 2 Michaelmas Term 2010 Economic...

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Unformatted text preview: Part IIB. Paper 2 Michaelmas Term 2010 Economic Growth Lecture 6: R&D Models of Economic Growth Dr Tiago Cavalcanti Readings and Refs. Texts: (*)Jones chs. 4&5 Articles: Romer P. (1990) Endogenous technical change Journal of Political Economy , 98 , no.5, S71-S102. Neo-classical model: steady-state growth rate g y = g k = g A = g determined exogenously in the model policies ( investment rate etc.) have only level , but not long run (steady state) growth effects transitional growth effects Recall: Exogenous Growth 1. explain technological progress within model 2. Long-run growth rate affected by policies that improve knowledge/technology creation In Learning by Doing model technical progress explained by externality in the aggregate production function perpetual long run growth only in special case = 1- dependence on parameter values typical feature Implications of Endogenous Growth - = 1 j j j L K A Y = L K A A In Learning by Doing models technical progress is an unintended by-product of economic activity (investment, education etc.) Knowledge creation unrewarded in such models remember Eulers THM r K + w L = Y CRS assumption no cookies left to pay for knowledge creation and technological progress g Reward for Knowledge Creation R&D Models of Growth improvements in technology achieved through new ideas ideas generated by allocating resources to research and development (R&D) important feature of knowledge: while potentially costly to generate, (inherently) non-rivalrous and non-excludable In a perfectly competitive world, the market price for an idea will be zero!...
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This note was uploaded on 06/04/2011 for the course ECONOMICS paper 2 taught by Professor Prado during the Spring '11 term at Cambridge.

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growth6 - Part IIB. Paper 2 Michaelmas Term 2010 Economic...

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