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Innovation and growth in the Grossman-Helpman’s model with increasing returns: a note


  • Guarini, Giulio


In this paper I consider the 1991 Grossman-Helpman model which analyses the role of innovation on growth. The model assumes constant returns to scale. I intend to show what happen in this model if I assume strong increasing returns. In particular, under the assumption of increasing returns of capital but leaving all other main features of the Grossman-Helpman model unchanged, I analyse the influence of the rate of innovation on three variables: the rate of growth of final output, the level of prices of final output and the rate of investment.

Suggested Citation

  • Guarini, Giulio, 2009. "Innovation and growth in the Grossman-Helpman’s model with increasing returns: a note," MPRA Paper 19612, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19612

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    References listed on IDEAS

    1. Luciano Boggio, 2003. "A Model of Take-Off and Fast Growth in Open Economies," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 301-325, May.
    2. Labini, Paolo Sylos, 1995. "Why the interpretation of the Cobb-Douglas production function must be radically changed," Structural Change and Economic Dynamics, Elsevier, vol. 6(4), pages 485-504, December.
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    More about this item


    Grossman-Helpman model; growth; innovation; increasing returns to scale;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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