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Entrepreneurial Innovation and Sustained Long-Run Growth without Weak or Strong Scale Effects

  • Grossmann, Volker

    ()

    (University of Fribourg)

R&D-based growth theory suggests that a larger population size raises either the long-run rate of economic growth (“strong scale effect”) or the level of per capita income (“weak scale effect”), with far-reaching policy implications. However, for modern times there is little empirical support for strong scale effects and evidence in favor of weak scale effects is mixed, at best. This paper develops a simple overlapping-generations framework with endogenous occupational choice of heterogeneous agents and entrepreneurial innovations in which any form of scale effect is absent. A higher population growth rate has a negligible, possibly negative effect on the long-run growth rate of per capita income. Long-run growth is sustained also in absence of population growth and generally is policy-dependent.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3389.

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Length: 33 pages
Date of creation: Mar 2008
Date of revision:
Publication status: published as "Entrepreneurial Innovation and Economic Growth" in: Journal of Macroeconomics, 2009, 31 (4), 602-613
Handle: RePEc:iza:izadps:dp3389
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