Parker 5 THEORIES OF ENDOGENOUS GROWTH

A. Topics and Tools ............................................................................. 1 B. The Microeconomics of Innovation and Human Capital Investment ........... 3 Returns to research and development .............................................................................. 4 Human capital vs. knowledge capital ............................................................................. 6 Returns to education ..................................................................................................... 6 C. Understanding Romer=s Chapter 3, Part A ............................................. 9 Introduction ................................................................................................................. 9 Romer’s modeling strategy and the research literature ...................................................... 9 The basic setup of the R&D model ............................................................................... 10 The knowledge production function .............................................................................. 11 Analysis of the model without capital ........................................................................... 12 The R&D model with capital ...................................................................................... 16 Returns to scale and endogenous growth ....................................................................... 17 Scale effects in the R&D model .................................................................................... 18 D. Understanding Romer’s Chapter 3, Part B ........................................... 20 The specification of the human-capital model ................................................................ 20 Analysis with the human-capital model ........................................................................ 20 Output per person vs. output per worker ........................................................................ 21 The specification of Romer’s predation model ................................................................ 24 Agents’ decisions in the predation model ....................................................................... 25 E. Suggestions for Further Reading ........................................................ 28 General texts on modern growth theory ......................................................................... 28 Selected seminal papers in modern growth theory .......................................................... 28 F. Works Cited in Text ........................................................................ 29