Knowledge Growth and the Allocation of Time

Robert Lucas and Benjamin Moll

No 17495, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze a model economy with many agents, each with a different productivity level. Agents divide their time between two activities: producing goods with the production-related knowledge they already have, and interacting with others in search of new, productivity-increasing ideas. These choices jointly determine the economy's current production level and its rate of learning and real growth. Individuals' time allocation decisions depend on the knowledge distribution because the productivity levels of others determine their own chances of improving their productivities through search. The time allocations of everyone in the economy in turn determine the evolution of its knowledge distribution. We construct the balanced growth path for this economy, thereby obtaining a theory of endogenous growth that captures in a tractable way the social nature of knowledge creation. We also study the allocation chosen by an idealized planner who takes into account and internalizes the external benefits of search, and tax structures that implement an optimal solution. Finally, we provide two examples of alternative learning technologies, as concrete illustrations of other directions that might be pursued.

JEL-codes: O1 O15 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-cis, nep-dge, nep-fdg and nep-knm
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published as Robert E. Lucas Jr. & Benjamin Moll, 2014. "Knowledge Growth and the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 122(1), pages 1 - 51.

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Working Paper: Knowledge Growth and the Allocation of Time (2011)
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