The role of diminishing returns in neo-Schumpeterian growth theory

Cindy Houser
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Cindy Houser: Department of Economics and Finance, Texas A&M International University, Laredo, TX 78041, USA

Economic Theory, 1998, vol. 12, issue 2, 335-347

Abstract: This paper generalizes Segerstrom [5], a dynamic general equilibrium model of endogenous growth through quality improvements in which innovation and imitation are modeled as the outcomes of research and development (R&D) races. Specific factors introduced into the technologies of both R&D activities achieve diminishing returns to scale in R&D. The comparative-static results of subsidies to R&D activities depend on the degree of diminishing returns to scale in R&D. When there is (is not) a sufficient degree of diminishing returns to R&D, a subsidy to innovative activity increases (decreases) innovative activity.

JEL-codes: O30 O41 (search for similar items in EconPapers)
Date: 1998-08-19
Note: Received: July 8, 1994; revised version: June 9, 1997
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Citations: View citations in EconPapers (2)

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