The Romer Model
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In this chapter we analyse a model where economic growth is driven by endogenous technical progress. The production structure is of the type introduced in Romer (1987) and Romer (1990). Economic growth is driven by technical progress which comes from the development of new intermediate products. Intermediate products are developed in a research sector. Incentives for research are given by patents which guarantee profits for the development of new intermediate products. We will assume a constant saving ratio as in Bräuninger (2001). We will analyse how public debt impinges on the research activity and on economic growth. As in the other chapters, we first consider the fixed deficit ratio and then we turn to the fixed tax rate.
KeywordsIntermediate Product Output Growth Public Debt Budget Deficit Capital Growth
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