The Romer Model of Endogenous Technological Change

Angus Chu

Chapter 13 in Advanced Macroeconomics:An Introduction for Undergraduates, 2020, pp 103-112 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Paul Romer greatly enhances economists’ understanding of endogenous technological change by developing a growth model in which technological progress is driven by the invention of new products, which in turn is due to research and development (R&D) by profit-seeking entrepreneurs. In this chapter, we cover the Romer model. In the previous chapter, we introduced a monopolistically competitive market structure to the Ramsey model. If we further introduce an R&D sector into the model to allow for endogenous growth in the number of products, then we have the Romer model. In other words, we have added several layers of structure to gradually extend the familiar Solow model into the less familiar Romer model. Once we derive the endogenous growth rate of technology in the Romer model, we can then perform comparative statics to explore the determinants of technological progress…

Keywords: Macroeconomics; Dynamic General Equilibrium; Economic Growth; Endogenous Technological Change; Monetary Policy; Fiscal Policy; Business Cycles; Unemployment; Market Failure; The Neoclassical Growth Model; The Romer Model; The Schumpeterian Growth Model; The Solow Growth Model; The Ramsey Model; The New Keynesian Model (search for similar items in EconPapers)
JEL-codes: E6 E62 E66 F4 F43 O11 (search for similar items in EconPapers)
Date: 2020
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