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Endogenous Growth, Temporary Equilibrium, and the Direction of Change

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  • Peter Funk

Abstract

This article studies the long-run direction of technological change in an endogenous growth model. Development is modeled as a sequence of temporary equilibria in an overlapping generations framework. We introduce a concept of `long-run efficient development' which excludes persistent inefficiencies. The concept is much weaker than short-run or long-run Pareto-efficiency and does not depend on our particular model. The main theorem of the article gives conditions on agents' expectations and preferences and on the evolution of innovation possibilities under which equilibrium development, guided by current prices and profit expectations, is long-run efficient.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonsfa/bonsfa506.ps
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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 506.

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Length: 34
Date of creation: May 1995
Date of revision:
Handle: RePEc:bon:bonsfa:506

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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Keywords: Endogenous growth; direction of change; temporary general equilibrium; efficient development.;

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References

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  1. Guesnerie, R., 1989. "An Exploration of the Eductive Justifications of the Rational Expectations Hypotbesis," DELTA Working Papers 89-24, DELTA (Ecole normale supérieure).
  2. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  3. Grossman, Gene M & Helpman, Elhanan, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 43-61, January.
  4. Grossman, G.M. & Helpman, E., 1989. "Quality Ladders And Product Cycles," Papers 39-89, Tel Aviv.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  6. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  7. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  8. Duranton, Gilles, 2001. "Endogenous labor supply, growth and overlapping generations," Journal of Economic Behavior & Organization, Elsevier, vol. 44(3), pages 295-314, March.
  9. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-85, May.
  10. Novshek, William & Sonnenschein, Hugo, 1980. "Small efficient scale as a foundation for Walrasian equilibrium," Journal of Economic Theory, Elsevier, vol. 22(2), pages 243-255, April.
  11. Funk Peter, 1995. "Bertrand and Walras Equilibria in Large Economies," Journal of Economic Theory, Elsevier, vol. 67(2), pages 436-466, December.
  12. Grandmont, Jean-Michel, 1993. "Temporary general equilibrium theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922 Elsevier.
  13. Peter Funk, 1994. "Economic Possibilities for the Grandchildern of John Maynard Keynes," Discussion Paper Serie A 512, University of Bonn, Germany.
  14. Segerstrom, P.S., 1990. "Innovation, Imitation And Economic Growth," Papers 8818, Michigan State - Econometrics and Economic Theory.
  15. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
  16. Funk,Peter, 1993. "The direction of technological change," Discussion Paper Serie A 393, University of Bonn, Germany.
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Cited by:
  1. Posch, Olaf & Wälde, Klaus, 2005. "Natural volatility, welfare and taxation," W.E.P. - Würzburg Economic Papers 57, University of Würzburg, Chair for Monetary Policy and International Economics.
  2. Grüner, Hans Peter, 2008. "Capital Markets, Information Aggregation and Inequality: Theory and Experimental Evidence," CEPR Discussion Papers 6750, C.E.P.R. Discussion Papers.

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