The dynamics of the Romer R & D growth model with quality upgrading

Lutz Georg Arnold () and Wolfgang Kornprobst

No 413, Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft from University of Regensburg, Department of Economics

Abstract: This paper replaces increasing product variety with quality upgrading in the Romer (1990) model. We show that the range of parameters for which a steady state exists can be divided into two subspaces with well-behaved comparative statics and saddle-point dynamics in one subspace, but with "perverse" comparative-statics properties and either equilibrium indeterminacy or instability in the other subspace. In the latter subspace, a parameter change possibly leads to a Hopf bifurcation. Using a theorem in Arnold (in press), these results for the closed economy can also be used to characterize the dynamics of the M-country open-economy version of the model.

Keywords: endogenous growth; transitional dynamics; indeterminacy; open economy; Wachstumstheorie / Endogenes Wirtschaftswachstum; Dynamische Stabilität; Wachstumstheorie (search for similar items in EconPapers)
JEL-codes: F12 O41 (search for similar items in EconPapers)
Date: 2006-06-29
Note: This paper is part of http://www.opus-bayern.de/uni-regensburg/schriftenreihen_ebene2.php?sr_id=3
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