40 Pages Posted: 28 May 2004
Date Written: September 1989
From the beginning, growth theory has been faced with technically challenging questions about increasing returns and the way to capture ideas in a model of market exchange. Initially, reliance on perfect competition forced growth theory to narrow its scope. Recently, new tools for studying dynamic equilibria with nonconvexities, externalities, and imperfect competition have allowed growth theory to address broader questions like: Why have growth rates tended to increase over time? Why is it that flows of capital are not sufficient to equalize wages in different countries? How is it that trade policy, or aggregate research and development expenditure, or the extent of patent protection influences the rate of growth?
Suggested Citation: Suggested Citation
Romer, Paul M., Increasing Returns and New Developments in the Theory of Growth (September 1989). NBER Working Paper No. w3098. Available at SSRN: https://ssrn.com/abstract=227464
By Paul Romer
By Meb Faber