Increasing Returns and Long-Run Growth
1986/10/01 by Paul M. Romer, Paul Romer · 108 citations
Economics, Econometrics and Finance · #Economic Growth and Productivity #Economic theories and models #Fiscal Policy and Economic Growth
paper · doi:10.1086/261420
Abstract
This paper presents a fully specified model of long-run growth in which knowledge is assumed to be an input in production that has increasing marginal productivity. It is essentially a competitive equilibrium model with endogenous technological change. In contrast to models based on diminishing returns, growth rates can be increasing over time, the effects of small disturbances can be amplified by the actions of private agents, and large countries may always grow faster than small countries. Long-run evidence is offered in support of the empirical relevance of these possibilities.
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