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Multiplicity and stagnation under the Romer model with increasing returns of R&D

Shiro Kuwahara

Economic Modelling, 2019, vol. 79, issue C, 86-97

Abstract: This study develops a simple growth model to explain stagnation and non-simple growth patterns by using increasing returns of R&D efficiency. The study adopts a type of the lab-equipment model, namely, the Romer model, where goods are used as R&D input. Here, we assume capital, or durable goods, as the R&D input factor, and R&D efficiency is assumed to be variable. This arrangement yields three steady states, namely: no-growth, low-growth, and high-growth steady states. These trajectories are jumpable. Accordingly, global indeterminacy is obtained. By uniting the numerical analysis, we obtain that all steady states are saddle stable. However, when the increasing R&D efficiency is small, the path converging to a high-growth-rate steady state shows local indeterminacy.

Keywords: Increasing returns; Multiple steady states; R&D-based growth; Poverty traps; Indeterminacy (search for similar items in EconPapers)
JEL-codes: E00 O00 O41 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.econmod.2018.10.003

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