Endogenous technological change

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 non-rival, partially excludable good. Because of the nonconvexity in-troduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic compe-tition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is de-voted 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.