Scale Effect in the Romer Model

Angus Chu

Chapter 14 in Advanced Macroeconomics:An Introduction for Undergraduates, 2020, pp 113-120 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we will explore an important but counterfactual property of the Romer model. Recall from the Romer model the following key equation:gN≡N˙t/Nt=θLR,t,where LR,t is the number of R&D workers and θ > 0 is an R&D productivity parameter. This equation implies that the growth rate gN of technology is increasing in the number of R&D workers LR,t. This property is known as the scale effect in the literature. Jones (1995) points out that this prediction from the Romer model is inconsistent with empirical evidence. Jones (1995) documents that the number of R&D scientists in the US steadily increased from 1950 to the late 1980s; however, the growth rate of technology did not exhibit any positive trend during this period; see Figures 14.1 and 14.2 in which we look at more recent data from 1990 to 2013. Motivated by this empirical fact, Jones developed a modified version of the Romer model, which is free from the scale effect…

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
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9781786349132_0014 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9781786349132_0014 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9781786349132_0014

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().