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From Solow to Romer: Teaching endogenous technological change in undergraduate economics

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  • Chu, Angus C.

Abstract

Undergraduate students learn economic growth theory through the seminal Solow model, which takes the growth rate of technology as given. To understand the origin of technological progress, we need a model of endogenous technological change. The Romer model fills this important gap in the literature. However, given its complexity, undergraduate students often find the Romer model difficult. This paper proposes a simple method of teaching the Romer model. We add three layers of structure (one at a time) to extend the familiar Solow model into the less familiar Romer model. First, we incorporate a competitive market structure into the Solow model. Then, we modify the competitive market structure into a monopolistic market structure. Finally, we introduce an R&D sector that invents new products.

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  • Chu, Angus C., 2018. "From Solow to Romer: Teaching endogenous technological change in undergraduate economics," International Review of Economics Education, Elsevier, vol. 27(C), pages 10-15.
    • Handle: RePEc:eee:ireced:v:27:y:2018:i:c:p:10-15
    DOI: 10.1016/j.iree.2018.01.006
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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
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    3. Philippe Aghion & Diego Comin & Peter Howitt & Isabel Tecu, 2016. "When Does Domestic Savings Matter for Economic Growth?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 381-407, August.
    4. Ai-Ting Goh & Jacques Olivier, 2002. "Optimal Patent Protection in a Two-Sector Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1191-1214, November.
    5. John B. Taylor, 2000. "Teaching Modern Macroeconomics at the Principles Level," American Economic Review, American Economic Association, vol. 90(2), pages 90-94, May.
    6. Lewis Evans & Neil Quigley & Jie Zhang, 2003. "Optimal price regulation in a growth model with monopolistic suppliers of intermediate goods," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 463-474, May.
    7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    8. Daron Acemoglu, 2013. "Economic Growth and Development in the Undergraduate Curriculum," The Journal of Economic Education, Taylor & Francis Journals, vol. 44(2), pages 169-177, June.
    9. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    10. -, 2009. "Economic growth in the Caribbean," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38668, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Bongers, Anelí & Gómez, Trinidad & Torres, José L., 2020. "Teaching dynamic General equilibrium macroeconomics to undergraduates using a spreadsheet," International Review of Economics Education, Elsevier, vol. 35(C).
    2. Jussi Heikkilä & Timo Ali-Vehmas & Julius Rissanen, 2021. "The Link Between Standardization and Economic Growth: A Bibliometric Analysis," International Journal of Standardization Research (IJSR), IGI Global Scientific Publishing, vol. 19(1), pages 1-25, January.
    3. A. N. M. Shibly Noman Khan & Mohaimen Mansur & Kazi Sharmin Pamela & Nabila Kamal Promy, 2024. "Women business moving beyond development enigma," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 14(1), pages 1-18, December.
    4. Bongers, Anelí & Molinari, Benedetto & Torres, José L., 2022. "Computers, Programming and Dynamic General Equilibrium Macroeconomic Modeling," MPRA Paper 112505, University Library of Munich, Germany.
    5. Chu, Angus C., 2020. "Advanced Macroeconomics for Undergraduates," MPRA Paper 98249, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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