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On Accounting "Capital" in Horizontal Innovation Models

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  • Man-Seop Park

    (Department of Economics, Korea University)

Abstract

I identify and correct some logical problems of the 1990 Romer model of horizontal innovation. The model's setting where all the produced inputs are durable is inconsistent with the proposed Dixit-Stiglitz production function; also, Romer's "accounting measure of capital" (and its variants in the literature) is not a theoretically proper measure on which the rate of interest is to be calculated. The correction is straightforward. However, a more fundamental issue is at stake: the structure of horizontal innovation models necessitates consideration of the problem of value, but the current literature deliberately assumes it away, generating internal inconsistency of various forms.

Suggested Citation

  • Man-Seop Park, 2007. "On Accounting "Capital" in Horizontal Innovation Models," Discussion Paper Series 0727, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:0727
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0727.pdf
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    References listed on IDEAS

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    1. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170, Elsevier.
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    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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