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Schumpeterian growth with variable demand elasticity

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  • Gilad Sorek

Abstract

Variable Demand Elasticity preferences are introduced into a canonical two‐sector R&D model. The departure from the traditional CES specification yields novel growth dynamics: for a sufficiently high population growth rate, a semi‐endogenous balanced growth path (“BGP”) of drastic innovation is characterized, along which economic growth is determined by the population growth rate. However, for a sufficiently low population growth rate, the model economy converges to the limit values of demand elasticity and a fully endogenous growth regime of non‐drastic innovation. A few stylized facts undermine the empirical relevance of the semi‐endogenous BGP with drastic innovation to developed economies.

Suggested Citation

  • Gilad Sorek, 2025. "Schumpeterian growth with variable demand elasticity," Economic Inquiry, Western Economic Association International, vol. 63(4), pages 1110-1126, October.
    • Handle: RePEc:bla:ecinqu:v:63:y:2025:i:4:p:1110-1126
    DOI: 10.1111/ecin.13302
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