Abstract
The explanation and causes of economic growth, the problem of convergence of per capita income among different economies, the low productivity growth in many advanced economies, and the presence of disrupting technological innovations remain at the center of the debate among economists. The present contribution analyzes the endogenous growth theory of Paul Romer and discusses its features and content through Romer’s main works on the topic. This study on Romer’s work highlights the existence and importance of increasing returns in the process of growth, the key role of knowledge, the ideas as non-rival goods, the existence of externalities, the endogeneity of technological change, and the primary role of human capital, especially in research activity. Institutions, such as property rights are important as well. The state also has a decisive role in education and the research sector. Another relevant aspect is that economic growth and technological change are closely interconnected; they cannot be separated. Romer’s theory of endogenous technological change ties the development of new ideas and economic growth to the number of people working in the knowledge sector. New ideas, being non-rival and partially excludable, are fundamental for growth since they make everyone producing physical goods and services more productive. Finally, Romer’s endogenous growth highlights the factors that provide incentives for knowledge creation; thus, his theory can also be considered a significant contribution to the theory of the knowledge-based economy.
Highlights
A general but important question economists ask is why countries all over the world, characterized by poorly developed economies in the recent and distant past, show a great capacity for growth, becoming in some cases true leaders
The explanation and causes of economic growth, the problem of convergence of per capita income among different economies, the low productivity growth in many advanced economies, and the presence of disrupting technological innovations remain at the center of the debate among economists
Romer’s theory of endogenous technological change ties the development of new ideas and economic growth to the number of people working in the knowledge sector
Summary
A general but important question economists ask is why countries all over the world, characterized by poorly developed economies in the recent and distant past, show a great capacity for growth, becoming in some cases true leaders. The increasing interdependence between economies reinforced by globalization processes, the emergence of the fourth industrial revolution, and the role of human capital and its learning capacity are undoubtedly important factors in influencing growth. These processes profoundly transform the economies, subjecting them to structural changes where some regions, sectors, and companies grow more compared to others, in terms of productivity and competitiveness. The fifth section analyzes the fundamental model of Romer’s endogenous theory that stresses the role of ideas and their non-rivalry feature, the relevance of the research sector and human capital, and the presence of monopolistic competition. The final section discusses Romer’s endogenous growth and presents conclusions
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
