Non-Scale Endogenous Growth with R&D and Human Capital
Scott J Polit Econ, 63: 443–467. doi:10.1111/sjpe.
40 Pages Posted: 10 Oct 2016
Date Written: October 4, 2016
This paper examines the conditions under which increasing knowledge, encapsulated in ideas for new technology through R&D and embodied in human capital through education, sustains economic growth. We develop a general model where, consistent with recent literature, growth is non-scale (not increasing in population size) and endogenous (generated by factors within R&D and education). Recent models feature the counterfactual assumption of constant returns to existing knowledge and restrict the substitutability of inputs within R&D and education. We find that non-scale endogenous growth is possible under less stringent conditions. Our findings reconcile sustained economic growth with evidence of diminishing marginal returns in education and R&D, which suggests an ambiguous role for R&D policy.
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