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Entrepreneurial innovation and economic growth

  • Grossmann, Volker

A fast growing empirical literature identifies an important role of entrepreneurs for productivity growth. This paper develops a simple overlapping-generations framework with endogenous occupational choice and productivity-enhancing entrepreneurial innovation. It shows that introducing these basic features into R&D-based growth theory has important implications. First, an equilibrium with price-taking firms can be supported despite a constant returns to scale production technology, once entrepreneurial human capital is accounted for. Second, in the proposed model, a larger size of the workforce capable to conduct R&D neither affects the long-run rate of economic growth ("strong scale effect") nor per capita income or welfare ("weak scale effect"). Economic growth is sustained in the long-run and may be policy-dependent.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 4 (December)
Pages: 602-613

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Handle: RePEc:eee:jmacro:v:31:y:2009:i:4:p:602-613
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