Economics 314 Coursebook , 2012 Jeffrey Parker 5

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 ....................................................... 9 Introduction ................................................................................................................. 9 The textbook’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 The (Paul) Romer model ............................................................................................. 19 D. Understanding Romer’s Chapter 4 ..................................................... 20 The specification of the human-capital model ................................................................ 20 Analysis with the human-capital model ........................................................................ 20 Output per person vs. output per worker ........................................................................ 21 E. Suggestions for Further Reading ........................................................ 24 General texts on modern growth theory ......................................................................... 24 Selected seminal papers in modern growth theory .......................................................... 25 F. Works Cited in Text ........................................................................ 25