Some Determinants of Endogenous Growth

Abstract

In Chapter 4 it was assumed that income, Y, in every period is split into two parts, consumption, C, and gross investment, I. In the real world quite frequently a fraction of income is neither consumed nor directly invested in production, but is invested indirectly in production, i.e. it is devoted to R&D to improve the productivity of inputs directly entering production.1 Here we want to extend the model presented in Chapter 4 to include the expenditure on R&D, denoted by R, so that the basic relation among aggregate quantities will be the sum of three components, Y = C + I + R.