Resetting the Innovation Clock: Endogenous Growth through Technological Turnover

Philippe Aghion, Antonin Bergeaud, Timo Boppart and Brouillette, Jean-Félix

No 20761, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We propose a model of endogenous economic growth with "weak'' scale effects and diminishing returns to innovation at the micro level. In our model, entrants introduce new technologies through research and incumbents incrementally improve them through development. Over time, further improvement becomes harder such that firms ultimately run out of ideas and exit, paving the way for entrants that discover new technologies with further room for improvement. This turnover gives rise to a continuous stream of (temporary) opportunities for technological improvements that sustain economic growth. In a stationary equilibrium, the growth rate is constant and endogenous to market incentives.

Keywords: Endogenous growth theory; Market size effect; Firm dynamics (search for similar items in EconPapers)
JEL-codes: O31 O40 (search for similar items in EconPapers)
Date: 2025-10
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