Steady Endogenous Growth with Population and R & D Inputs Growing

Abstract

This paper presents a Schumpeterian endogenous growth model in which a steady state exists with a constant growth rate even though population and the inputs to R & D are growing. The scale effect of rising population is nullified by product proliferation that fragments the growing demand for intermediate products, thus preventing the reward to any specific innovation from rising with population. All the usual comparative statics results of Schumpeterian growth theory are valid, including the positive effect of R & D subsidies on growth.

JEL Classification: E20, O30