Multiplicity and stagnation under the Romer model with increasing returns of R&D |
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| Institution: | 1. Research Institute of Economics and Management, Southwestern University of Finance and Economics;2. Institute of Urban Development, School of Economics, Nanjing Audit University;3. Institute of Economics, Academia Sinica;1. Department of Economics, Faculty of Social Science, University of Western Ontario, London, Ontario N6A 5C2, Canada;2. China Financial Policy Research Center, Renmin University of China, Beijing 100872, PR China;3. School of Finance, Xingjiang University of Finance and Economics, Urumqi, 830012, PR China. |
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| Abstract: | This study develops a simple growth model to explain stagnation and non-simple growth patterns by using increasing returns of R&D efficiency. The study adopts a type of the lab-equipment model, namely, the Romer model, where goods are used as R&D input. Here, we assume capital, or durable goods, as the R&D input factor, and R&D efficiency is assumed to be variable. This arrangement yields three steady states, namely: no-growth, low-growth, and high-growth steady states. These trajectories are jumpable. Accordingly, global indeterminacy is obtained. By uniting the numerical analysis, we obtain that all steady states are saddle stable. However, when the increasing R&D efficiency is small, the path converging to a high-growth-rate steady state shows local indeterminacy. |
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| Keywords: | Increasing returns Multiple steady states R&D-based growth Poverty traps Indeterminacy E00 O00 O41 |
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