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The Dynamics of the Romer R&D Growth Model with Quality Upgrading

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  • Arnold, Lutz G.
  • Kornprobst, Wolfgang

Abstract

This paper replaces increasing product variety with quality upgrading in the Romer (1990) model. We show that the range of parameters for which a steady state exists can be divided into two subspaces with well-behaved comparative statics and saddle-point dynamics in one subspace, but with "perverse" comparative-statics properties and either equilibrium indeterminacy or instability in the other subspace. In the latter subspace, a parameter change possibly leads to a Hopf bifurcation. Using a theorem in Arnold (in press), these results for the closed economy can also be used to characterize the dynamics of the M-country open-economy version of the model. Diese Arbeit ersetzt zunehmende Produktvielfalt durch Qualitätsverbesserungen im Romer-Modell (Romer, 1990). Wir zeigen, dass es zwei Parameterbereiche gibt, in denen steady states existieren. Ein Teilbereich hat eine normale komparative Statik und Sattelpunkt-Stabilität. Der andere hingegen eine "verdrehte" komparative Statik und entweder Indeterminiertheit oder Instabilität. In diesem Bereich kann es durch eine Änderung von Parametern zu einer Hopf Bifurkation kommen. Mit einem Theorem aus Arnold (2006) können diese Ergebnisse aus der geschlossenen Volkswirtschaft auf die offene Volkswirtschaft übertragen werden und die Dynamik eines M-Länder-Modells charakterisiert werden.

Suggested Citation

  • Arnold, Lutz G. & Kornprobst, Wolfgang, 2006. "The Dynamics of the Romer R&D Growth Model with Quality Upgrading," University of Regensburg Working Papers in Business, Economics and Management Information Systems 413, University of Regensburg, Department of Economics.
    • Handle: RePEc:bay:rdwiwi:673
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    References listed on IDEAS

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    1. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    2. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
    3. Lutz G. Arnold, 2000. "Endogenous technological change: a note on stability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 219-226.
    4. Arnold, Lutz G., 2000. "Stability of the Market Equilibrium in Romer's Model of Endogenous Technological Change: A Complete Characterization," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 69-84, January.
    5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    6. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    7. Michael B. Devereux & Beverly J. Lapham, 1994. "The Stability of Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 299-305.
    8. Lutz G. Arnold, 2006. "The Dynamics of the Jones R&D Growth Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 143-152, January.
    9. Benhabib, Jess & Perli, Roberto & Xie, Danyang, 1994. "Monopolistic competition, indeterminacy and growth," MPRA Paper 37411, University Library of Munich, Germany, revised 1994.
    10. Lutz Arnold, 2007. "A generalized multi-country endogenous growth model," International Economics and Economic Policy, Springer, vol. 4(1), pages 61-100, April.
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    Cited by:

    1. Wolfgang Kornprobst, 2007. "Das Romer-Modell mit qualitaetsverbesserndem technischem Fortschritt," Working Papers 014, Bavarian Graduate Program in Economics (BGPE).

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    More about this item

    Keywords

    Wachstumstheorie / Endogenes Wirtschaftswachstum ; Dynamische Stabilität ; Wachstumstheorie; ; endogenous growth ; transitional dynamics ; indeterminacy ; open economy;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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