Working Paper: NBER ID: w3098
Authors: Paul Romer
Abstract: From the beginning, growth theory has been faced with technically challenging questions about increasing returns and the way to capture ideas in a model of market exchange. Initially, reliance on perfect competition forced growth theory to narrow its scope. Recently, new tools for studying dynamic equilibria with nonconvexities, externalities, and imperfect competition have allowed growth theory to address broader questions like: Why have growth rates tended to increase over time? Why is it that flows of capital are not sufficient to equalize wages in different countries? How is it that trade policy, or aggregate research and development expenditure, or the extent of patent protection influences the rate of growth?
Keywords: growth theory; increasing returns; trade policy; research and development
JEL Codes: O40; O30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market size (L25) | economic growth (O49) |
| introduction of new goods (D40) | economic growth (O49) |
| trade policy (F13) | economic growth (O49) |
| research and development (O32) | economic growth (O49) |
| external increasing returns (O36) | economic growth (O49) |