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The idea of increasing returns in neoclassical growth models

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  • Mario Pomini
  • Giovanni Tondini

Abstract

In the mid 1980s there was a remarkable revival of interest in growth theory and once again this became a very active area of macroeconomic research. A relevant strand of this approach is characterized by the departure from the usual assumption of diminishing returns of capital or, more generally, of the accumulated factor. This paper will show how the neoclassical theorists incorporated the idea of increasing return in the formal models of economic growth. The central point is that the recent recognition of the importance of this notion is not new but now depends on the vision of economic growth as driven by knowledge accumulation and no longer by capital accumulation as in the Solovian tradition.

Suggested Citation

  • Mario Pomini & Giovanni Tondini, 2006. "The idea of increasing returns in neoclassical growth models," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(3), pages 365-386.
  • Handle: RePEc:taf:eujhet:v:13:y:2006:i:3:p:365-386
    DOI: 10.1080/09672560600875497
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Cesaratto, Sergio, 1999. "Savings and Economic Growth in Neoclassical Theory," Cambridge Journal of Economics, Oxford University Press, vol. 23(6), pages 771-793, November.
    3. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January.
    4. Romer, Paul M, 1990. "Are Nonconvexities Important for Understanding Growth?," American Economic Review, American Economic Association, vol. 80(2), pages 97-103, May.
    5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Fratesi, Ugo, 2007. "The Spatial Diffusion of Innovations and the Evolution of Regional Disparities," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, AsociaciĆ³n EspaƱola de Ciencia Regional, issue 11, pages 131-160.

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