Abstract
Recent empirical evidence demonstrates that a higher level of technical progress is associated with a lower level of growth volatility and higher expected economic growth. This paper builds a simple growth model which combines the insights of Angeletos and Kollintzas (2000) and Tse (2000; 2001; 2002) with endogenous productivity growth and rent-seeking behavior to account for these stylized facts. Our model complements the literature that focuses on the heterogeneity of different agents.
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