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The Romer Model of Endogenous Technological Change

In: ADVANCED MACROECONOMICS An Introduction for Undergraduates

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  • Angus C. Chu

Abstract

Paul Romer greatly enhances economists’ understanding of endogenous technological change by developing a growth model in which technological progress is driven by the invention of new products, which in turn is due to research and development (R&D) by profit-seeking entrepreneurs. In this chapter, we cover the Romer model. In the previous chapter, we introduced a monopolistically competitive market structure to the Ramsey model. If we further introduce an R&D sector into the model to allow for endogenous growth in the number of products, then we have the Romer model. In other words, we have added several layers of structure to gradually extend the familiar Solow model into the less familiar Romer model. Once we derive the endogenous growth rate of technology in the Romer model, we can then perform comparative statics to explore the determinants of technological progress…

Suggested Citation

  • Angus C. Chu, 2020. "The Romer Model of Endogenous Technological Change," World Scientific Book Chapters, in: ADVANCED MACROECONOMICS An Introduction for Undergraduates, chapter 13, pages 103-112, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781786349132_0013
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    Keywords

    Macroeconomics; Dynamic General Equilibrium; Economic Growth; Endogenous Technological Change; Monetary Policy; Fiscal Policy; Business Cycles; Unemployment; Market Failure; The Neoclassical Growth Model; The Romer Model; The Schumpeterian Growth Model; The Solow Growth Model; The Ramsey Model; The New Keynesian Model;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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