On Accounting "Capital" in Horizontal Innovation Models
AbstractI identify and correct some logical problems of the 1990 Romer model of horizontal innovation. The model's setting where all the produced inputs are durable is inconsistent with the proposed Dixit-Stiglitz production function; also, Romer's "accounting measure of capital" (and its variants in the literature) is not a theoretically proper measure on which the rate of interest is to be calculated. The correction is straightforward. However, a more fundamental issue is at stake: the structure of horizontal innovation models necessitates consideration of the problem of value, but the current literature deliberately assumes it away, generating internal inconsistency of various forms.
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Bibliographic InfoPaper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0727.
Length: 22 pages
Date of creation: 2007
Date of revision:
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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- Gino Gancia & Fabrizio Zilibotti, 2005.
"Horizontal innovation in the theory of growth and development,"
Economics Working Papers
831, Department of Economics and Business, Universitat Pompeu Fabra.
- Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170 Elsevier.
- Gino Gancia & Fabrizio Zilibotti, 2005. "Horizontal Innovation in the Theory of Growth and Development," Working Papers 200, Barcelona Graduate School of Economics.
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