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long run economic growth

Emphasizes that technological change influenced by

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emphasizes that technological change influenced by economic incentives working of market system. Paul Romer : accumulation of knowledge capital is subject to diminishing returns at the firm level subject to increasing returns at firm level but increasing returns at level of entire economy once knowledge available to everyone. Knowledge is non-rival and non excludable other firms benefit from results they didn’t pay for firms unlikely to invest in R&D GVT policy help increase accumulation of knowledge capital: - Protecting intellectual property with patents (protection 20 years) & copyright protection - Subsidizing R & D (subisidies to encourage R&D + tax benefits to firms) - Subsidizing education increase number of workers who have technical training and higher learning Economic growth in the United States Since 1950, continuing Tech change allowed US economy to avoid diminish returns in capital. ≠ Soviet economy Development of a “new economy” based on information technology higher productivity growth that began in the mid-1990 Why isn’t the whole world rich ? Catch-up = prediction that the level of GDP per capita in poor countries will grow
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