A1 Temu3 Makro2 Endogenous ME2

Macroeconomics 2
MACROECONOMICS 2
Mahyus Ekananda
Chapter 3
Endogenous Growth Theory :
The Research and Development Model
Mahyus Ekananda 1
Macroeconomics 2
Model yang kami lihat sejauh ini tidak memberikan jawaban yang memuaskan
untuk pertanyaan sentral tentang pertumbuhan ekonomi. Hasil utama model
adalah negatif: jika pendapatan modal mencerminkan kontribusinya terhadap
output, maka akumulasi tidak memperhitungkan sebagian besar dari
pertumbuhan jangka panjang atau perbedaan pendapatan lintas negara. Dan
satu-satunya penentu pendapatan dalam model selain modal adalah variabel
misteri, ''efektivitas tenaga kerja'' (A), yang maknanya tidak ditentukan dan yang
perilakunya diambil sebagai eksogen.
Mahyus Ekananda 2
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Specifics
Model ini adalah versi yang disederhanakan dari model

Produksi ide-ide baru tergantung pada
R&D dan pertumbuhan yang dikembangkan oleh P.
Romer (1990), Grossman dan Helpman (1991), dan
jumlah modal dan tenaga kerja yang
Aghion dan Howitt (1992). terlibat dalam penelitian dan di tingkat
Model, seperti yang lain kita telah belajar, melibatkan teknologi. Mengingat asumsi kami tentang
empat variabel: tenaga kerja (L), modal (K), teknologi (A), produksi Cobb Douglas yang digeneralisasi,
dan output (Y). Model diatur dalam waktu terus menerus. maka kami menulis
(3.1)
(3.2)
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Seperti dalam model Solow, tingkat Demikian pula, kami terus

simpanan bersifat eksogen dan memperlakukan pertumbuhan
konstan. Selain itu, depresiasi populasi sebagai sesuatu yang
ditetapkan ke nol untuk eksogen dan konstan.
kesederhanaan. Jadi, Untuk kesederhanaan, kami tidak
mempertimbangkan kemungkinan
(3.3) itu negatif.
Ini menyiratkan
(3.4)
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3.2 The Model without Capital (3.1)
The Dynamics of Knowledge Accumulation
(3.2)
(3.3)
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(3.2)
(3.6)
Dimana
(3.7)
the growth rate of the growth rate of A
(3.9)
Untuk mendeskripsikan lebih lanjut bagaimana tingkat pertumbuhan A berperilaku

(dan dengan demikian mengkarakterisasi perilaku output per pekerja), kita harus
membedakannya
kasus θ <1, θ> 1, dan θ = 1.
Kami membahas masing-masing secara bergiliran.
Mahyus Ekananda 6
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Untuk mendeskripsikan lebih lanjut bagaimana

tingkat pertumbuhan A berperilaku (dan dengan
demikian mengkarakterisasi perilaku output per
pekerja),
max
𝑔𝐴ሶ > 0
𝑔𝐴 << 𝑔𝐴ሶ < 0
(3.9) 𝑔𝐴 ≫
𝑔𝐴ሶ = 0 𝑛 + 1 −  𝑔𝐴∗ = 0
∗
𝑛
𝑔𝐴 = 0
1−
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Untuk mendeskripsikan lebih lanjut bagaimana

tingkat pertumbuhan A berperilaku (dan dengan
demikian mengkarakterisasi perilaku output per
pekerja),
max 𝑔𝐴ሶ > 0

𝑔𝐴 << 𝑔𝐴ሶ < 0
𝑔𝐴 ≫
𝑔𝐴ሶ = 0
𝑎𝐿 Tidak ada
𝑎𝐿 Ada
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𝑎𝐿 Tidak ada
𝑎𝐿 Ada
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(3.9)
min
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0
(3.9)
(3.11)
(3.12)
(3.7)
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The Importance of Returns to Scale to Produced Factors
Alasan mengapa ketiga kasus memiliki implikasi yang berbeda adalah itu apakah θ kurang dari, lebih besar dari,
atau sama dengan 1 menentukan apakah ada adalah decreasing, increasing, or constant returns to scale ke faktor-
faktor produksi yang diproduksi.
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The Importance of Population Growth
(3.7)
Ingatlah bahwa ketika θ <1, model memiliki implikasi
mengejutkan bahwa pertumbuhan populasi positif
diperlukan untuk pertumbuhan pendapatan per orang
pada jangka panjang, dan tingkat pertumbuhan
ekonomi jangka panjang (economy’s long-run growth Ketika ada lebih banyak orang untuk membuat
rate) meningkat dalam populasi pertumbuhan. Kasus- penemuan, lebih banyak penemuan dibuat. Dan ketika
kasus lain memiliki implikasi serupa. Ketika θ = 1 dan n = lebih banyak penemuan dibuat, stok pengetahuan
0, pertumbuhan jangka panjang adalah fungsi tumbuh lebih cepat, dan dengan demikian (semua sama)
peningkatan dari tingkat populasi. Dan bila θ> 1 (atau θ output per orang tumbuh
= 1 dan n> 0), dapat menunjukkan bahwa peningkatan lebih cepat.
populasi pertumbuhan menyebabkan pendapatan per
Dalam kasus khusus θ = 1 dan n = 0, efek ini beroperasi secara
orang menjadi lebih tinggi.
khusus cara: pertumbuhan jangka panjang meningkat di tingkat
populasi. Kapan θ lebih besar dari 1, efeknya bahkan lebih kuat,
Untuk memahami hasil ini, pertimbangkan persamaan karena peningkatan tingkat atau laju pertumbuhan populasi
(3.7) untuk akumulasi pengetahuan: menyebabkan peningkatan pertumbuhan yang terus
meningkat. Jika θ kurang dari 1,
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The Dynamics of Knowledge and Capital
(3.1) (3.13)
(3.3)
The Dynamics of Capital

(3.14)
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The Dynamics of Capital
Taking logs of both sides and differentiating with respect

to time yields
(3.15)
𝑔𝐾ሶ = 0 1 −  [𝑔𝐴 𝑡 + 𝑛 − 𝑔𝐾 𝑡 ] = 0
𝑔𝐴 𝑡 + 𝑛 − 𝑔𝐾 𝑡 = 0
𝑔𝐾 𝑡 = 𝑔𝐴 𝑡 + 𝑛
FIGURE 3.5 The dynamics of the growth rate of

capital in the general version of the model
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The Dynamics of Knowledge(A) Similarly, equation (3.7),
Similarly, dividing both sides of equation (3.2),
(3.7)
(3.2)
Taking logs and differentiating with respect to time gives
(3.16)
(3.17)
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The Dynamics of Knowledge(A) 𝑛

𝑔𝐴ሶ > 0 𝑔𝐾 𝑡 > − + (1 − )𝑔𝐴 𝑡 /

(3.17)
𝑔𝐴ሶ = 0 𝑔𝐾 𝑡 + 𝑛 + ( − 1)𝑔𝐴 𝑡 = 0 𝑛

𝑔𝐴ሶ < 0 𝑔𝐾 𝑡 < − + (1 − )𝑔𝐴 𝑡 /

<1 𝑔𝐾 𝑡 = −𝑛/ − ( − 1)𝑔𝐴 𝑡 /
𝑛
𝑔𝐾 𝑡 = − + (1 − )𝑔𝐴 𝑡 / 𝑛
 𝑖𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 ∶ −

Slope ∶ (1 − ) /
FIGURE 3.6 The dynamics of the growth rate of

knowledge in the general
version of the model
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the degree of returns to scale to K and A 𝑔𝐴ሶ > 0

in knowledge production
(3.2)
degree of returns ∶  + 
degree of returns ∶  +  < 1
degree of returns ∶  +  > 1
degree of returns ∶  +  = 1
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Slope A : (1 − ) /
degree of returns ∶  +  < 1 <1−
1 < (1 − )/
𝑛
𝑖𝑛𝑡𝑒𝑟𝑐𝑒𝑝𝑡 ∶ −
 Slope K : 1
Slope ∶ (1 − ) / > 1
(3.18)
(3.19)
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(3.18)
(3.19)
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degree of returns ∶  +  = 1 𝑎𝑛𝑑 n = 0
FIGURE 3.8 The dynamics of the growth rates

of capital and knowledge when β + θ = 1 and n
=0
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degree of returns ∶  +  > 1
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3.4 The Nature of Knowledge and the

Determinants of the Allocation of
Resources to R&D
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Support for Basic Scientific Research
Pengetahuan ilmiah dasar secara tradisional telah tersedia secara relative bebas; Hal
yang sama berlaku untuk hasil dari banyak penelitian yang dilakukan di institusi seperti
universitas modern dan biara abad pertengahan. Jadi ini penelitian tidak dimotivasi
oleh keinginan untuk memperoleh keuntungan pribadi di pasar. Sebaliknya itu didukung
oleh pemerintah, badan amal, dan individu kaya dan dikejar oleh individu yang
dimotivasi oleh dukungan ini, oleh keinginan untuk ketenaran, dan bahkan mungkin
karena cinta pengetahuan.
Private Incentives for R&D and Innovation
Banyak inovasi, mulai dari perkenalan produk yang sama sekali baru perbaikan kecil pada
barang-barang yang ada, menerima sedikit atau tidak ada dukungan eksternal dan hampir
seluruhnya dimotivasi oleh keinginan untuk mendapatkan keuntungan pribadi. Itu
pemodelan kegiatan litbang swasta ini dan implikasinya terhadap ekonomi pertumbuhan
telah menjadi subjek penelitian yang cukup banyak; contoh penting termasuk P. Romer
(1990), Grossman dan Helpman (1991), dan Aghion
dan Howitt (1992). Mahyus Ekananda 24
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Alternative Opportunities for Talented Individuals
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Learning-by-Doing
Ketika Learning-by-Doing adalah sumber kemajuan teknologi, kecepatannya akumulasi

pengetahuan tidak bergantung pada bagian ekonomi sumber daya yang terlibat dalam R&D, tetapi
tentang seberapa banyak pengetahuan baru yang dihasilkan oleh kegiatan ekonomi konvensional.
Menganalisis Learning-by-Doing oleh karena itu membutuhkan beberapa perubahan pada
model kami. Semua input sekarang digunakan dalam barang produksi; dengan demikian fungsi
produksi menjadi
When learning-by-doing is the source of technological progress, the rate

of knowledge accumulation depends not on the fraction of the economy’s
resources engaged in R&D, but on how much new knowledge is generated
by conventional economic activity. Analyzing learning-by-doing therefore
requires some changes to our model. All inputs are now engaged in goods
production; thus the production function becomes
(3.22)
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Persamaan (3.22) (3.23), bersama-sama dengan (3.3)

(3.4) menggambarkan akumulasi modal dan tenaga (3.22)
kerja, mencirikan ekonomi. Untuk menganalisis
perekonomian ini, mulailah dengan mensubstitusi
(3.23) ke (3.22) menjadi: (3.23)
(3.24)
Seperti dalam model Solow, tingkat

(3.3) simpanan bersifat eksogen dan
konstan. Selain itu, depresiasi
ditetapkan ke nol untuk
(3.25) kesederhanaan. Jadi,
learning-by-doing model
Mahyus Ekananda 27
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Dalam model akumulasi pengetahuan tanpa modal di Bagian

3.2, dinamika A diberikan oleh
learning-by-doing model
Bandingkan
(3.6) (3.25)
dengan
Sebagai persamaan (3.6) dan (3.25) menunjukkan, dinamika kedua model pada
dasarnya adalah sama. Dengan demikian kita dapat menggunakan hasil analisis kita
dari model sebelumnya untuk menganalisis yang satu ini. Di sana, penentu utama
dinamika perekonomian adalah bagaimana θ dibandingkan dengan 1. Di sini, dengan
analogi, bagaimana α + φ (1 - α) dibandingkan dengan 1, yang setara dengan
bagaimana φ dibandingkan dengan 1.
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Jika φ kurang dari 1, tingkat pertumbuhan ekonomi jangka panjang adalah sebuah
fungsi dari tingkat pertumbuhan populasi, n. Jika φ lebih besar dari 1, berarti ada
ledakan pertumbuhan. Dan jika φ sama dengan 1, ada pertumbuhan eksplosif jika n
positif dan pertumbuhan stabil jika n sama dengan 0.
Sekali lagi, kasus yang mendapat perhatian khusus adalah φ = 1

dan n = 0. Dalam hal ini,
(3.24) Menjadi (3.26)
Oleh karena itu, akumulasi modal diberikan oleh (3.27)
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(3.27)
Seperti dalam kasus serupa yang telah kita bahas, dinamika ekonomi ini sangat mudah.
Persamaan (3.27) langsung mengimplikasikan bahwa K tumbuh dengan mantap pada tingkat
sb. Dan karena keluaran sebanding dengan K, ia juga tumbuh dalam situasi ini. Jadi kami
memiliki contoh lain dari model jangka panjang pertumbuhan bersifat endogen dan
bergantung pada tingkat tabungan. Apalagi sejak b kebalikan dari rasio modal-output, yang
mudah diukur, model membuat prediksi tentang ukuran dampak tingkat tabungan pada
pertumbuhan dan masalah kami akan kembali ke Bagian 3.6.
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3.5 The Romer Model
Pada bagian ini kami mempertimbangkan

model tertentu di mana alokasi sumber daya
hingga R&D dibangun dari fondasi
mikroekonomi: model P. Romer (1990) tentang
perubahan teknologi endogen. Dalam model
ini, R&D adalah dilakukan oleh pelaku ekonomi
yang memaksimalkan keuntungan. R&D itu
mendorong pertumbuhan, yang pada gilirannya
memengaruhi insentif untuk mengabdikan
sumber daya untuk R&D.
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1
The Ethier Production Function and the Returns to
Knowledge Creation
The specific assumption about how the inputs

Untuk melihat implikasi dari fungsi ini, misalkan LY
combine to produce final output uses the production
menunjukkan jumlah total pekerja memproduksi input,
function proposed by Ethier (1982)
dan misalkan jumlah yang memproduksi masing-masing
tersedia masukannya sama. Kemudian L (i) = LY / A
untuk semua i, dan seterusnya
(3.28)
(3.29)
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This expression has two critical implications. First, there Lagrangian untuk
are constant returns masalah menghasilkan satu unit output dengan
to LY : holding the stock of knowledge constant, doubling biaya minimum adalah
the inputs (3.30)
into production doubles output. Second, output is
increasing in A: holding
the total quantity of inputs constant, raising the stock of
knowledge raises
output. This creates a value to a new idea. The first-order condition for an individual L(i ) is
Ungkapan ini memiliki dua implikasi kritis. Pertama, ada

pengembalian konstan (3.31)
ke LY: menahan stok pengetahuan secara konstan,
menggandakan input
menjadi produksi ganda. Kedua, output meningkat di A: holding
jumlah total input konstan, meningkatkan stok pengetahuan
meningkat
keluaran. Ini menciptakan nilai bagi ide baru.
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where we have used the fact that must equal 112
menyiratkan (3.32)
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Equation (3.32) shows that the holder of the patent on an

idea faces a
downward-sloping demand curve for the input embodying
the idea: L(i ) is a smoothly decreasing function of p (i ).
When φ is closer to 1, the marginal
product of an input declines more slowly as the quantity of the
input rises.
As a result, the inputs are closer substitutes, and so the
elasticity of demand
for each input is greater.
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2
The Rest of the Model
We now turn to the remainder of the model, which involves four sets of assumptions. The first set concern
economic aggregates. Population is fixed and equal to L > 0. Workers can be employed either in producing
intermediate inputs or in R&D. If we let LA(t ) denote the number of workers engaged in R&D at time t, then
equilibrium in the labor market at t requires
(3.33) The production function for new ideas is linear in the

number of workers employed in R&D and proportional to
dimana the existing stock of knowledge:
the total
number of
workers
(3.34)
producing
inputs
These assumptions are chosen to give the model the aggregate dynamics of a linear growth model.
Equation (3.34) and the assumption of no population growth imply that if the fraction of the
population engaged in R&D is constant, the stock of knowledge grows at a constant rate, and that
this rate is an increasing function of the fraction of the population engaged in R&D.
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Thus the representative individual’s lifetime utility is

The third set of assumptions concern the
A microeconomics of R&D. There is free entry
(3.35)
into idea creation: anyone can hire 1/[BA(t )]
units of labor at the prevailing wage w(t ) and
where C(t ) is the individual’s consumption at t produce a new idea (see [3.34]). Even
though an increase in A raises productivity in
R&D, R&D firms are not required to
B compensate the inventors of past ideas. Thus
the model assumes the R&D externality
(3.36)
discussed in Section 3.4.
where r is the interest rate, X(0) is initial wealth per

person, and w(t ) is the wage at t. The individual
takes all of these as given.
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The free-entry condition in R&D requires that the The final assumptions of the model concern general
present value of the profits earned from selling the equilibrium. First, the assumption that the labor
input embodying an idea equals the cost of market is competitive implies that the wage paid in
creating it. Suppose idea i is created at time t, and R&D and the wages paid by all input producers are equal.
let π(i ,τ ) denote the profits earned by the creator Second, the only asset in the economy is the patents.
of the idea at time τ . Thus initial wealth is the present value of the future
C profits from the ideas that have already been invented.
Finally, the only use of the output good is for
(3.37) consumption. Because all individuals are the same, they
all choose the same consumption path. Thus equilibrium
in the goods market at time t requires
D
(3.38)
Solving the Model
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The first step in solving the model is to consider the problem of a patentholder
choosing the price to charge for his or her input at a point in time. A standard result from
microeconomics is that the profit-maximizing price of a monopolist is η/(η−1) times
marginal cost, where η is the elasticity of demand. In our case, we know from equation
(3.32) for cost-minimization by the producers of final goods that the elasticity of demand
is constant and equal to 1/(1 − φ). And since one unit of the input can be produced from
one unit of labor, the marginal cost of supplying the input at time t is w(t ). Each
monopolist therefore charges [1/(1 − φ)]/{[1/(1 − φ)] − 1} times w(t ), or w(t )/φ .16
(3.30)
(3.32)
The first-order condition for an individual L(i ) is
(3.31)
This neglects the potential complication that the analysis in equations (3.30)
(3.32) shows the elasticity of input demand conditional on producing a given
amount of output.
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Given our assumption that LA is constant and the

requirement that LA(t )+LY (t ) = L, this quantity
is ( L − LA)/A(t ). Each patent-holder’s profits are Equation (3.29) tells us that in this case,
thus
(3.39)
Since LY (t ) is constant, the
growth rate of Y is
To determine the present value of profits from an
invention, and hence the growth rate of A
the incentive to innovate, we need to determine the
economy’s growth
rate and the interest rate.
Equation (3.34) for knowledge creation,
(3.34)
implies that if LA is constant, A(t )/A(t ) is just BLA.

Mahyus Ekananda 40
Macroeconomics 2
Once we know the growth rate of consumption,

finding the real interest rate is straightforward. Equation (3.39) tells us that the profits at t are
Recall from Section 2.2 that consumption growth
for a household with constant-relative-risk-
aversion utility is
These profits grow at the growth rate of w
where θ is the coefficient of relative risk aversion. With

logarithmic utility, θ is 1. Thus equilibrium requires
minus the growth rate of A
(3.40)
They are discounted at rate r

Thus if LA is constant, the real interest rate is constant, as
we have been assuming.
Mahyus Ekananda 41
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The present value of the profits earned from the discovery

The equilibrium condition is therefore
of a new idea at time t is therefore
(3.42)
(3.41)
Solving this equation for LA yields
We are now in a position to find the equilibrium value of (3.43)

LA. If the amount of R&D is strictly positive, the present
value of profits from an invention must equal the costs of
the invention. Since one worker can produce BA(t ) ideas
per unit time, the cost of an invention is
Mahyus Ekananda 42
Macroeconomics 2
The amount of R&D need not be strictly positive, however.

In particular, when (3.43) implies LA < 0, the discounted
profits from the first invention starting from LA = 0 are less
than its costs. As a result, R&D is 0. Thus we need to
modify equation (3.43) to
(3.44)
Finally, since the growth rate of output is
(3.45)
Mahyus Ekananda 43
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Implications
The model has two major sets of implications. The first concern the determinants of long-run growth.
Four parameters affect the economy’s growth rate.18
Untuk melihat implikasi dari fungsi ini, misalkan LY
First, when individuals are less patient (that is, when menunjukkan jumlah total pekerja memproduksi input,
ρ is higher), fewer workers engage in R&D (equation dan misalkan jumlah yang memproduksi masing-masing
[3.44]), and so growth is lower (equation [3.45]). tersedia masukannya sama. Kemudian L (i) = LY / A
Since R&D is a form of investment, this makes untuk semua i, dan seterusnya
sense. Second, an increase in substitutability among (3.29)
inputs (φ) also reduces growth. There are two
reasons. First, fewer workers engage in R&D (again,
equation [3.44]).
(3.44)
Second, although a given amount of R&D translates
into the same growth rate of A (equation [3.34]), a
given growth rate of A translates into slower output
growth (equation [3.29]). This finding is also intuitive: (3.45)
when the inputs embodying different ideas are better
substitutes, patentholders’ market power is lower,
and each additional idea contributes less to output.
Both effects make R&D less attractive. Mahyus Ekananda 44
Macroeconomics 2
Third, an increase in productivity in the R&D

sector (B) increases growth. There are again
two effects at work. The first is the
straightforward one that a rise in B raises
growth for a given number of workers
engaged in R&D. The other is that increased
(3.44)
productivity in R&D draws more workers into
that sector.
Finally, an increase in the size of the (3.45)

population (L) raises long-run growth.
Paralleling the effects of an increase in B,
there are two effects: growth increases for a
given fraction of workers engaged in R&D,
and the fraction of workers engaged in R&D
increases. The second effect is another
consequence of the nonrivalry of knowledge:
an increase in the size of the economy
expands the market an inventor can reach,
and so increases the returns to R&D. Mahyus Ekananda 45
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All four parameters affect growth at least in part by changing the fraction of workers
who are engaged in R&D. None of these effects are present in the simple model of
R&D and growth in Sections 3.1 3.3, which takes the allocation of workers between
activities as given. Thus the Romer model identifies a rich set of determinants of long-
run growth. The model’s second major set of implications concern
Mahyus Ekananda 46
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Because all output is consumed, the representative individual’s consumption

is 1/L times output. Equation (3.29) for output therefore implies that the representative
individual’s consumption at time 0 is
One can show that the solution to this integral is20

(3.46)
Output and consumption grow at rate

(3.48)
Representative individual’s lifetime utility is therefore
(3.47)
Mahyus Ekananda 47
Macroeconomics 2
Maximizing this expression with respect to LA shows that

the socially optimal level of LA is given by21
(3.49)
(3.50)
Model tersebut berpotensi memiliki ketiga eksternalitas yang dijelaskan dalam Bagian 3.4. Ada
efek surplus konsumen (atau, dalam hal ini, surplus produsen barang efek): karena pemegang
paten mengenakan harga tetap per unit masukan yang mewujudkan idenya, perusahaan yang
menghasilkan keluaran akhir memperoleh surplus dari membeli input perantara. Bisa ada
bisnis yang mencuri atau efek yang menciptakan bisnis.
Mahyus Ekananda 48
Macroeconomics 2
Are Growth Rates Stationary?
Mahyus Ekananda 49
Macroeconomics 2
A simple one is to regress the growth rate of income

per person on a constant and a trend,
and then test the null hypothesis that b = 0
A second test is an augmented Dickey-Fuller test.

Consider a regression of the form
If growth has some normal level that it reverts to

when it is pushed away, ρ is negative. If it does not, ρ
is 0
Mahyus Ekananda 50
Macroeconomics 2
Ada dua kesulitan, keduanya terkait fakta bahwa stasioneritas dan nonstasioneritas
memperhatikan karakteristik data di infinite horizons. Pertama, tidak ada data dalam jumlah
terbatas yang dapat ditumpahkan terang tentang bagaimana seri berperilaku di infinite horizons.
Misalnya kita melihat perubahan pertumbuhan yang sangat terus-menerus di beberapa sampel.
Meskipun demikian konsisten dengan adanya perubahan permanen dalam pertumbuhan, itu sama
saja konsisten dengan pandangan bahwa pertumbuhan kembali dengan sangat lambat ke suatu
nilai. Kalau tidak, misalkan kita mengamati bahwa pertumbuhan kembali dengan cepat ke suatu
nilai dari sampel.
Kedua, sulit untuk memikirkan pertanyaan ekonomi substantif apa pun itu bergantung pada
stasioneritas atau nonstasioneritas data. Dalam kasus teori pertumbuhan, pertumbuhan bisa
nonstasioner bahkan jika pertumbuhan sepenuhnya model endogen tidak menggambarkan
dunia.
Mahyus Ekananda 51
Macroeconomics 2
The Magnitudes and Correlates of Changes in Long-

Run Growth
Pendekatan kedua Jones adalah untuk memeriksa hubungan antara determinan pertumbuhan yang
diidentifikasi oleh model pertumbuhan endogen dan tingkat pertumbuhan aktual. Dia mulai dengan
mempertimbangkan model belajar sambal melakukan seperti itu satu dibahas dalam Bagian 3.4
dengan φ = 1. Ingat bahwa model tersebut menghasilkan sebuah hubungan :
Jones mengamati bahwa Y / K, δ, dan

gL semuanya tampak cukup stabil,
sementara tingkat investasi cenderung
naik. Dengan demikian model
memprediksi tren peningkatan
di mana gx menunjukkan tingkat pertumbuhan x. gK diberikan pertumbuhan
oleh
Mahyus Ekananda 52
Macroeconomics 2
Kremer (1993), menerapkan model dalam pengaturan yang sangat berbeda: ia berpendapat bahwa
model tersebut menyediakan wawasan tentang dinamika populasi, teknologi, dan pendapatan selama
sapuan luas dari sejarah manusia.
Kedua, penambahan pengetahuan sebanding dengan populasi,
dan juga bergantung pada stok pengetahuan
A Simple Model
(3.58)
Versi paling sederhana terdiri dari tiga persamaan.
Pertama, Dan ketiga, populasi menyesuaikan sehingga output per
keluaran tergantung pada teknologi, tenaga kerja, dan orang sama dengan kebutuhan level hidup, dilambangkan
lahan dengan y (bar)
(3.57) (3.59)
dimana T menunjukkan persediaan tanah yang tetap

(3.60)
Mahyus Ekananda 53
Macroeconomics 2
(3.61)
(3.60)
(3.62)
In the special case of θ =1, equation (3.58) for

knowledge accumulation implies (3.58)
that A(t )/A(t ) = BL(t ).
Jadi dalam hal ini, (3.62) mengimplikasikan bahwa laju pertumbuhan penduduk sebanding
dengan tingkat jumlah penduduk. Dalam kasus umum, dapat ditunjukkan bahwa model tersebut
mengimplikasikan bahwa laju pertumbuhan populasi sebanding dengan L (t) ψ,
Mahyus Ekananda 54
Macroeconomics 2
(3.58)
To see this, divide both sides of (3.58) by A to obtain an
expression for A/A. Then use (3.60) to express A in terms
of L, and substitute the result into the expression for A/A.
Expression (3.62) then implies that L/L equals a constant
times L(t )ψ .
(3.60)
θ =1,
In the special case of θ =1, equation (3.58) for

knowledge accumulation implies
that A(t )/A(t ) = BL(t ).
θ <1 Kremer’s model implies increasing growth
Mahyus Ekananda 55
Macroeconomics 2
Model Kremer menyiratkan peningkatan

pertumbuhan bahkan dengan hasil yang
semakin berkurang dalam produksi
pengetahuan baru (yaitu, bahkan dengan θ
<1) karena tenaga kerja sekarang
merupakan faktor yang diproduksi:
Peningkatan teknologi mengarah pada

populasi yang lebih tinggi, yang pada
gilirannya mengarah pada peningkatan
lebih lanjut dalam teknologi. Lebih lanjut,
efeknya mungkin besar. Misalnya,
meskipun α adalah sepertiga dan θ adalah
satu-setengah, bukan 1
Mahyus Ekananda 56
Macroeconomics 2
Gambar tersebut menunjukkan hubungan

yang sangat positif, dan kira-kira linier
antara pertumbuhan penduduk dan tingkat
populasi. Regresi
pertumbuhan konstan dan hasil populasi
(dalam miliar)
FIGURE 3.9 The level and growth rate of population, 1 million B.C.
to 1990 (from Kremer, 1993; used with permission)
Mahyus Ekananda 57
Macroeconomics 2
Analisis kami tentang pertumbuhan ekonomi dimotivasi oleh dua masalah: pertumbuhan
dari waktu ke waktu dalam standar hidup, dan perbedaannya di berbagai bagian di dunia.
Oleh karena itu wajar untuk menanyakan apa model R&D dan akumulasi pengetahuan
harus mengatakan tentang masalah ini.
Harapan awal para peneliti adalah model-model

akumulasi pengetahuan akan memberikan
penjelasan terpadu tentang pertumbuhan dan lintas
negara di seluruh dunia perbedaan pendapatan.
Mahyus Ekananda 58
Macroeconomics 2
Tentu saja akan sangat diinginkan untuk menyempurnakan ide-ide ini dengan meningkatkan kami pemahaman
tentang jenis pengetahuan apa yang paling penting untuk pertumbuhan, kepentingan kuantitatif mereka, dan
kekuatan yang menentukan bagaimana pengetahuan terakumulasi. Misalnya, kita ingin membahas kebijakan
yang konkret intervensi, seperti menggandakan dukungan pemerintah untuk penelitian ilmiah dasar atau
menghilangkan kredit pajak R&D.
Seperti Soal 3.14 meminta Anda untuk

mendemonstrasikan, jika seseorang percaya bahwa
ekonomi dijelaskan oleh sesuatu seperti model Solow 3.14. Delays in the transmission of knowledge
tetapi tidak semua memiliki akses ke teknologi yang to poor countries
sama, ketertinggalan dalam penyebaran pengetahuan
dari negara kaya ke negara miskin yang perlu
dipertanggungjawabkan. perbedaan pendapatan yang
diamati sangat panjang sekitar satu abad atau lebih.
Sulit dipercaya bahwa alasan mengapa beberapa
negara begitu miskin adalah karena mereka tidak
memiliki akses ke peningkatan teknologi yang telah
terjadi selama seabad terakhir.
Mahyus Ekananda 59
Macroeconomics 2
Akses kepada
Mahyus Ekananda 60
Macroeconomics 2
3.14. Delays in the transmission of knowledge to poor countries

A
Assume that the world consists of two regions, the North

and the South
The North
The South does not do R&D but simply uses the

technology developed in the North however, the
technology used in the South lags the North’s by τ
years.
Mahyus Ekananda 61
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Mahyus Ekananda 62
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Mahyus Ekananda 63
3.1 FRAMEWORK AND ASSUMPTIONS
UNO, ECON 6204, Summer 2011, Dr. Notes drawn from Chapter 3 of Romer's "Advanced
64
Tufte Macroeconomics", 4th Ed.
Overview
• We’ll model technology as the output of a research and development
industry
o So the economy produces two things: consumption goods and ideas
• Major simplification
o We’re going to go back to the idea that the saving rate is constant, and not
optimally determined
• Continuous time
65
Specifics
• Same four endogenous variables: K, L, A and Y
o For simplicity, there is no depreciation
• Two sectors
o Goods
o Ideas
• Labor and capital are split between the two sectors
o You can only work in one sector
• Technology is not split
o Ideas can be used anywhere
66
Specifics
• Goods production function
– Y(t)=[(1-aK)K(t)][(1-aL)A(t)L(t)](1-)
– The shares of labor and capital devoted to goods production, aK and aL,
are exogenous.
– Ideas production function
– dA/dt=B[aKK(t)]β[aLL(t)]γA(t)θ
– Note that this is production of new ideas (old ideas do not have to
be replaced)
– This function allows for decreasing, constant or increasing returns
to scale
67
Specifics
• Returns-to-scale restrictions are made to capture scalability of
production processes
o Constant-returns-to-scale makes sense for most physical processes, so we
impose it for the goods production function
o It isn’t clear what makes sense for the production of ideas, so β+γ+θ isn’t
restricted to equal 1
 Later, we spend a lot of time discussing what seems plausible
68
Specifics
• The key to understanding the model is the similarities and differences
between output, capital and technology
o New output is produced every period, but it is all consumed in that period (its
“depreciation” = 100%)
o New technology is produced every period, but it never depreciates, so it
accumulates like capital
o Capital is output diverted from consumption
o Technology is produced instead of consumption
69
Digression: Similarity to the Solow Model
• In the Solow model:
o dK/dt = sY(t) = s[K(t)][A(t)L(t)](1-)
o We didn’t divide the economy into 2 sectors, but we could have
• In this model
o dA/dt=B[aKK(t)]β[aLL(t)]γA(t)θ
o We could equate some parameters and get back to the Solow model
o So, there isn’t much here that we couldn’t have done in Chapter 1.
70
3.2 THE MODEL WITHOUT CAPITAL
71
• For simplicity, assume =β=0
• The production functions are then
o Y(t)=(1-aL)A(t)L(t)
– dA/dt=B[aLL(t)]γA(t)θ
– The growth rate of technology is then:
– gA(t)=(dA/dt)/A=B[aLL(t)]γA(t)θ-1
72
• What we want is the growth rate of the growth rate of technology,
(dgA/dt)/gA
o You might call this the “acceleration” of technology
• Substitute in for L(t) and A(t) to get:
– gA(t)=B[aLL(0)ent]γ[A(0)egt]θ-1
– Take logs to get:
– lngA(t)=lnB+γln[aLL(0)]+ntγ+(θ-1)lnA(0)+gAt(θ-1)
– Note the switch from g to gA in this chapter, and the notational switch
just above because I can’t do a subscript of a superscript in Powerpoint
– Take the time derivative to get:
– (dgA/dt)/gA=nγ+gA(θ-1)
73
• Multiply through by gA to get:
– (dgA/dt) =nγgA+(gA)2(θ-1)
– The behavior of this quadratic will depend on the size of θ
– The growth of technology is endogenous — if it’s growing
then it will change its growth rate — so new growth models
are sometimes called endogenous growth models
74
Case 1: θ<1
• This is not the same θ as in the CRRA function
o Here, it is the effect of existing technology on the creation of new ideas
• The steady state is where:
• (dgA/dt) =nγgA+(gA)2(θ-1)=0,
• Or gA* = γn/(1-θ)
• So the rate of growth of technology converges to a positive value
• In the real world, this seems to be upward convergence
75
Case 1: θ<1
• This is a model of endogenous growth
o Output growth occurs because of technological growth
o Technology grows because new ideas are created and old ideas don’t
depreciate
• It’s kind of odd that the growth of technology depends on population
growth
o This seems truer at larger scales, but not at smaller ones
• Technological growth does not depend on the proportion of people
working in research and development
76
Case 1: θ<1
• The steady state growth rate of technology depends on the
production parameters for ideas (of course), and the population
growth rate.
o But, it’s always the same sign as the population growth rate
• The actual growth rate of technology depends on the share of labor
working in R&D, but the steady state growth rate does not.
o So putting more people into R&D can increase your growth rate in the short-
run but not in the long-run.
77
Case 1: θ<1
• So, an increase in the share of the population working in R&D can
produce a level effect on technology and output
o But, no growth effect
• For example, the R&D in a war effort might boost your output
permanently, but would only produce a transitory effect on its growth
rate
o This sounds a lot like the U.S. in World War II
78
Case 2: θ>1
• In this case, there is no steady-state growth rate of technology
o The growth rate accelerates
• This implies that the overall economy never reaches a steady-state
either
o This is implausible, but shouldn’t be completely dismissed. Growth rates of
developed countries have been inching up over the decades.
 This is one type of fully endogenous model of growth
79
Case 3: θ=1
• The model simplifies to:
– gA(t)=B[aLL(0)ent]γ
– Growth of ideas depends on population
– Growth of ideas depends on the proportion of the population working in
research and development
– (dgA/dt) =nγgA
 Growth of ideas is accelerating when population growth is positive, and has no steady
state.
 Growth of ideas stops when population growth stops
• These models are simple and plausible
o Sometimes called AK models
80
The Importance of Returns to Scale to
Produced Factors
• It’s reasonable for goods and/or capital capital to have constant
returns to scale
• It’s not that clear that idea production should have constant returns
to scale
o If it doesn’t, this will be transmitted to the rest of the economy
81
The Importance of Population Growth
• In all of these models, output growth rates
o Increase with the level of population
o Generally increase with the population growth rate
 Yet output growth rates will stabilize at a high level when population levels out
• But, to the extent that technology is easily transmitted across
borders, what is critical is world population, and world population
growth rates.
82
Digression: Population Policies and Luddites
• Luddites were a 19th century social movement that believed in
destroying technology and capital to preserve jobs
• Endogenous growth models suggest that severe enough population
control policies are capable of producing technological regress
without the need to destroy anything
83
3.3 THE GENERAL CASE
84
• The instantaneous growth rate of capital is:
o dK/dt = sY(t)
• Substitute in the production function to get:
odK/dt = s[(1-aK)K(t)][(1-aL)A(t)L(t)](1-)
• Gather constants so that:
o cK=s(1-aK)(1-aL)(1-)
– dK/dt = cK[K(t)][A(t)L(t)](1-)
– gK(t)=(dK/dt)/K = cK[K(t)]-1[A(t)L(t)](1-)
85
– Take logs of both sides to get:
– lngK(t)=lncK+(1-)ln[A(t)L(t)/K(t)]
– Now take the derivative with respect to time to get:
– dgK(t)/dgK(t)=(1-)[gA(t)+n-gK(t)]
86
– In gA-gK space, the locus where this equals zero is:
– dgK(t)/dgK(t)=0=(1-)[gA(t)+n-gK(t)]
– This must slope upward, and
– Intercept the gK axis at n.
– The implied dynamics are that when we are above the line
gK(t) is relatively large and must be declining
87
– Recall that the growth rate of technology is:
– gA(t)=B[aKK(t)]β[aLL(t)]γA(t)θ-1
– Factor out constants to get:
– gA(t)=B[aK]β[aL]γ[K(t)]β[L(t)]γA(t)θ-1
– Take logs to get:
– lngA(t)=ln{B[aK]β[aL]γ}+βlnK(t)+γlnL(t)+(θ-1)lnA(t)
– Now take the derivative with respect to time:
– [dgA(t)/dt]/gA(t)= βgK(t) + γn + (θ-1)gA(t)
88
• In gA-gK space, the locus where this equals zero is:
– [dgA(t)/dt]/gA(t) = 0 = βgK(t) + γn + (θ-1)gA(t)
– The intercept on the gK axis is at -γn/β <0
– The slope, (1-θ)/β, is indeterminate
– There are several cases, most of them implausible
– The direction of movement is to the right, dgA> 0, when above the
line
– Since this is where gK is relatively large
89
Case 1: β + θ < 1
• In this case the slope of the dgA/dt locus is steeper than the dgK/dt
locus
• The direction of the arrows indicates a sink at the steady-state
o This means that sunspots can lead to one country being on one (short-run)
path and another being on a different (short-run) path without it really
making much difference to the long-run outcome
90
Case 1: β + θ < 1
• At the steady state:
odgK(t)/dgK(t)=0=(1-)[gA(t)+n-gK(t)]
 gA(t)+n = gK(t)
o[dgA(t)/dt]/gA(t) = 0 = βgK(t) + γn - (θ-1)gA(t)
 β[gA(t)+n] + γn - (θ-1)gA(t) = 0
 gA(t)[β + (θ-1)] = -γn – βn
 gA(t) = (γ + β)n/[1 – β - θ]
oSo, technological and capital growth depend positively on γ, β, n,
and θ
 They do not depend on the labor and capital shares devoted to research
and development, or the saving rate
91
Case 1: β + θ < 1
• Models like this are sometimes called semi-endogenous growth
models, because
o Growth is endogenous, but
o There isn’t much interesting that we can say about pro-growth policies
because the growth rates at the sink only depend on the production
parameters and the population growth rate.
92
Case 2: β + θ = 1, and n=0
• In this case the two loci coincide
o All points on the intersection are steady states
 All of them are sinks
 Now sunspots make a big difference, because they can take you to a steady-state where
growth is higher or lower than in other countries
• This is another case of a fully endogenous growth model
o This is similar to Romer ‘90
93
Digression: Scale Effects and Growth
• There is a distinction that needs to be made between two
mathematical possibilities.
oβ + θ < 1
 This leads to a sink in which rates of growth converge upward to the steady-state, so that
growth rates accelerate
oβ – θ + γ > 1
 Increasing-returns-to-scale in idea production
 Note that in this model you do not need to have increasing-returns-to-scale in order to
have high and accelerating growth rates
94
3.4 THE NATURE OF KNOWLEDGE AND THE
DETERMINANTS OF THE ALLOCATION OF RESOURCES TO
R&D
95
Overview
• Goods are rival
o If you are using it, other people can’t use it
• Knowledge is non-rival
o If you are using it, other people still can use it
• Non-rivalry implies marginal costs that are zero in most situations.
Thus either:
o Knowledge production can’t be profitable, or
o The price of knowledge is marked up in imperfect markets
96
Overview
• Goods tend to be excludable
o You can prevent someone else from using your (private) good
 Non-excludability is why we learn about public goods
• Knowledge can be excludable or non-excludable
o Excludability can be due to
 Complexity
 Legal and social restrictions
o Excludability helps make knowledge production profitable
97
Support for Basic Scientific Research
• If you support basic research with a subsidy, you can get around the
non-rivalry and non-excludability problems
o It makes sense to do this because there is a positive externality to research
98
• Models exist in which innovators can earn monopoly profits (or at
least positive but sub-optimal economic profits) from their new ideas
o Outcomes are not Pareto-optimal due to imperfect markets
o Positive externalities lead to too little R&D
o Negative externalities lead to too much R&D
99
• Consumer Surplus Effects
o The positive externality associated with knowledge spillovers
• Business-Stealing Effects
o The negative externality from new technology displacing old technology
• R&D Effects
o The positive externality from innovators profiting from making new goods,
but not from others expanding on their ideas
100
Alternative Opportunities for Talented
Individuals
• Rent seeking can include lots of activities that are not beneficial for
growth
o We should see more rent seeking in:
 Small (and/or artificially closed) market
 Innovators profit more in bigger markets
 Markets in which severely diminishing returns are protected
 Why innovate if you can still profit in a field that isn’t scalable?
 Regions in which property rights are poorly defined
 Why innovate when you might not get to keep the money?
101
Learning-by-Doing (AK Models)
• The Solow production function is used
o But, the aggregate stock of technology is now driven by the aggregate stock of
capital:
 A(t)=BK(t)φ, φ > 0
 The more capital in existence, the more ideas there are about how to use capital
o So, dK/dt=sK(t)αB(1- α)K(t)φ(1- α)L(t)(1- α)
 The behavior of this equation is similar to the model with no capital; φ here and θ there
work similarly
 When φ<1, output growth depends on population growth
102
Digresson: 3 Romers
• David: macroeconomist at U.C.-Berkeley, author of this text.
o Married to Christina
• Christina: macroeconomist at U.C.-Berkeley, first head of Obama’s
council of economic advisors
o Married to David
• Paul: macroeconomist at NYU, has an absolute lock on a Nobel prize
for his seminal work in endogenous growth
o Founder of Aplia (an economics homework site)
o Advocate for charter cities.
o Not related to David Romer
103
3.5 The Romer Model
This section is based on his 1990 paper (similar to slide

18), not his 1986 paper (similar to slide 43).
Overview
• Ideas have:
o Fixed costs to develop, and
o Are non-rival, while excludability is difficult
• This means the developers of ideas won’t develop any at all without
some monopoly power.
• But, you also can’t have monopoly power for “ideas”. You need
monopoly power for each “distinct idea” so that substitution is
limited.
105
Overview
• The model of this section is most similar to the simplified example on
Slide 18.
o This eliminates having to worry about transition dynamics.
o We use transition dynamics (phase diagrams) all the time, but the Romer text
is trying to fill space with new ideas, not rehash ones you’ve already learned.
106
The Ethier Production Function and the
Returns to Knowledge Creation
• Ethier production:
o Infinite number of (potential) inputs
 You can use one or more
o Critical feature:
 Suppose you use m units of n different inputs, divided evenly
 You will get more output if you divide the m units over n+1 different inputs (divided
evenly)
• Romer assumes that each input is an idea, and that a certain amount
of labor uses each idea
107
• So: Y=[∫L(i)φdi](1/φ) , where 0<φ<1
o Y=[A(LY/A)φ](1/φ)=[A1](1/φ) [(LY)φ](1/φ) [(A)-φ](1/φ)
o Y=A(1- φ)/φ LY
 Constant returns to scale in labor
 Increasing, constant, or diminishing marginal productivity from ideas
• Examples (where A is the total number of ideas)
o LY=12, A=2, φ=1/3
 Y = [(2)(12/2)(1/3)][1/(1/3)] = 48
o LY=12, A=3, φ=1/3
 Y = [(3)(12/3)(1/3)][1/(1/3)] = 108
• Bottom line: the producer of final output wants to incorporate as many ideas
as possible.
108
• An output producing firm takes the price set by the R&D sector, so
their constrained cost minimization Lagrangian is:
o ∫p(i)L(i)di-λ{[∫L(i)φdi](1/φ)-1}
 There’s a “trick” here. Since there are no scale effects, the production quota can be set to
any value without changing the optimal solution.
 So, we can choose to set it to 1 for convenience, and
 [∫L(i)φdi](1/φ) = 1
 ∫L(i)φdi = 1
109
• The FOC of the problem are then of the form:
o p(i) = λ{[∫L(i)φdi](1/φ-1)L(i) (φ-1)
o But, from the previous slide, the term in the middle goes to 1, so:
o p(i) = λL(i) (φ-1)
• Without making a full solution, since φ<1, it should be clear the
derived demand for the labor using the “inventors” idea, L(i), will
have downward sloping demand
110
• Later, we’ll need the elasticity of demand
o This is the same for each of the i inputs, so I’ll drop the i index
o From p = λL(φ-1)
o Then: dp = λ (φ-1) L (φ-2)dL + L(φ-1)d λ
o Holding λ constant yields: dL/dp=1/{λ (φ-1) L (φ-2)}
o Multiply this by p/L to obtain the elasticity:
o (dL/dp)(p/L)=1/{λ (φ-1) L (φ-2)}{λL(φ-1)/L}=1/ (φ-1)
o On pg. 128, Romer states this as an absolute value
111
• It is difficult to show, but as φ approaches 1 the marginal product of an
idea gets flatter
o This implies that the ideas are closer substitutes, and therefore
o The elasticity of demand for each input is greater
112
• Total population is fixed (in this simplified model) at L-overbar
• Some labor works in the R&D sector, LA, and some works in the goods
producing sector LY
o These amounts are not fixed, so
o L-overbar = LA(t)+LY(t)
113
• New ideas are created in proportion to the number of existing ideas,
and the number of people working in R&D
o dA/dt = BLA(t)A(t), where B>0
• So, ideas will grow at a constant rate unless we add labor to the R&D
sector.
114
• Individuals optimize using a simplified version of the Ramsay-Cass-
Koopmans models
o Max U=∫e-ρtlnC(t)dt, for ρ>0
 The text assumes log-utility (a special case of CRRA) for simplicity.
o s.t. ∫e-rtC(t)dt ≤ X(0) + ∫e-rtw(t)dt
115
• There is free entry in idea creation
o To create 1 new idea
 Hire 1/[BA(t)] workers
 So new ideas actually require less labor as technology expands
 Pay them w(t)
 You do not need to pay the holders of patents on previous ideas to create your new idea,
but
 You can’t sell your new idea either
 It needs to be “embodied” in labor that knows how to use it.
116
• An idea can’t be sold. Instead it is embodied in workers who know it.
o The patent holder decides how many workers to embody, and what price to
charge for them
o This monopoly profit maximization problem requires that the monopolist
know the wage of workers, the prices of other embodied ideas, and the
amount of labor used to produce goods to yield its derived demand
117
• Free entry and exit will drive the firms in the R&D sector to a zero
profit condition
o They are monopolistically competitive
o Dynamically, this condition is that the present value of future discounted
profits equals the cost of creating the idea:
 ∫e-r(τ -t)π(i, τ)dτ = w(t)/[BA(t)]
118
• Additional general equilibrium assumptions
o The wage is the same in both sectors
o Initial wealth is the present value of the endowment of ideas at time zero.
o Output is only used for consumption, and
o In a (simple) model with identical agents, they all consume the same amount.
119
Solving the Model
• The framework of the D. Romer text has assumed away a lot of the
detail in the P. Romer paper.
o Specifically, D. Romer has constructed the textbook model so that the share of
income in each sector is constant
120
Solving the Model
• The patent-holder is a monopolist.
• The optimal gross mark-up (the ratio of price to marginal cost) is a
well-known result from managerial economics: η/(η-1), where η is the
elasticity of demand
• Given the earlier result that the elasticity of demand is 1/(φ-1), the
price the embodied labor can be sold for is then w(t)/φ
121
Solving the Model
• Since each patent-holder has 1 idea to embody, the units of labor
they can sell is (L-overbar-LA)/A(t)
• And the profit on each of those laborers is their rental price minus
their wage: {[w(t)/φ]-w(t)}
• So total profit to each patent-holder is
o [(L-overbar-LA)/A(t)]{[w(t)/φ]-w(t)}, or
o [(1- φ)/φ][(L-overbar-LA)/A(t)]w(t)
122
Solving the Model
• We now have instantaneous profits for the patent-holder
o But, we need to find the present value of this in perpetuity
 So we need to discount it, and
 We need to account for the fact that its future value will grow with the economy
• Recall from basic finance that there is a formula for the value of a
growing perpetuity
o If we can figure out the growth rate of profit, and the appropriate discount
rate, we can get the present value.
123
Solving the Model
• The growth rate of the economy will be related to the growth rate of
ideas
o By definition: dA/dt = BLA(t)A(t)
 So: (dA/dt)/A(t) = BLA(t)
 This is constant in this model
o And Y=A[(1- φ)/φ]LY
o So lnY = [(1- φ)/φ]lnA + lnLY
o And dY/dt = [(1- φ)/φ](dA/dt) = [(1- φ)/φ]BLA(t)
124
Solving the Model
• Wages will also grow at the same rate as output
o Since all output is used to pay factors of production, and embodied ideas are
the only one
o Pay for embodied ideas is divided between labor and monopoly profits by a
constant mark-up
o The amount of overall labor in the R&D market is constant, so the wage is
never further divided up
125
Solving the Model
• The growth rate of profit only depends on the growth rate of
output/wages, and the growth rate of technology
o Rearranging profit a bit yields:
oπ = [(1- φ)/φ][L-overbar-LA]w(t) /A(t)
oSo: lnπ = ln[ ] + ln[ ] +ln[w(t)] – ln[A(t)]
 I didn’t type what’s inside the brackets to save space
o Then dπ/dt = dw/dt – dA/dt
o dπ/dt = [(1-φ)/φ]BLA(t)- BLA(t) = [(1-2φ)/φ]BLA(t)
126
Solving the Model
• The growth rate of consumption must also be the same as the growth
rate of output
o Since all output is consumed
• But, the Keynes-Ramsay rule tells us how consumption growth is
related to rates of return
o dC/dt = r – ρ (for log utility)
o r = dC/dt + ρ = ρ + [(1- φ)/φ]BLA(t)
 This is constant since the share of labor employed in R&D is constant
127
Solving the Model
• Now we can apply the (continuous time) formula for a growing
perpetuity to get the present value of the infinite profit stream from
an idea
o PV=cash flow/(r-g)
o PV = {[(1- φ)/φ][(L-overbar-LA)/A(t)]w(t)}/{ρ + [(1- φ)/φ]BLA(t) – [(1-
2φ)/φ]BLA(t)}
o This simplifies to: PV = [(1- φ)/φ]{(L-overbar-LA)/[ρ + BLA(t)]}[w(t)/A(t)]
128
Solving the Model
• Recall that the present value of the profit stream must equal the cost
of an idea
o PV = w(t)/bA(t)
• This can be solved for LA
o LA = (1-φ)L-overbar-фρ/B
• Note that this might be negative, so the realistic answer is
• LA = max{(1-φ)L-overbar-фρ/B,0}
o And dY/dt = max{[(1-φ)2/φ]BL-overbar – (1-ф)ρ,0}
129
Implications
• This formula can tell us which exogenous factors are important for
long-run growth
• The model can also tell us if decentralized decision-making will lead to
optimal growth (or just growth)
130
Implications
• A higher discount rate leads to lower growth
o [d(dY/dt)]/dρ = -(1-φ)= φ-1 < 0
o Because the present value of profits from ideas is lower
131
Implications
• If ideas are closer substitutes (φ is closer to 1) then growth is lower
o[d(dY/dt)]/dφ = (BL-overbar){-2(1-φ)φ-1-(1-φ)2φ-2} + ρ
 Strictly speaking this is ambiguous, but it is unlikely that ρ would be large enough to
make it positive
o Because the Ethier production function is like a CES, higher φ denotes greater
substitutability, so there is less opportunity for mark-up and monopoly
profits, and thus less incentive to create new ideas that drive growth
132
Implications
• Increased productivity in the R&D sector will increase growth
rates
o[d(dY/dt)]/dB = (1-φ)2L-overbar/φ > 0
• The text says there are two reasons for this
oThat growth of ideas is higher
o Labor in the R&D sector goes up
• I think these are just 2 reflections of the same thing
oIt is cheaper to produce a new idea, so people will think up more
of them
133
Implications
• An increase in the population causes higher growth rates
o [d(dY/dt)]/dL-overbar = (1-φ)2B/φ > 0
o The reason is that there are more people to sell output to, so more reason to
buy embodied ideas as inputs.
134
Implications
• All 4 exogenous factors work by making the creation of new ideas
more profitable, thereby increasing the fraction of labor working in
the R&D industry in equilibrium.
135
Implications
• The model has imperfect markets
o This means that it violates the First Welfare Theorem, or alternatively
o It is consistent with the Greenwald-Stiglitz theorem
• Either way, this means that the model’s equilibrium will not be Pareto
optimal
o Therefore we can improve everyone’s outcome without hurting anyone
 Would we want to? Why not?
136
Implications
• Why is the equilibrium not Pareto-optimal?
o Because R&D is too small in a decentralized market
o This is because R&D is driven by monopoly profits, and monopolists
systematically restrict output to maximize their profits
o So … if a central planner could direct R&D, we might get to a higher level of
growth
• I’m not too concerned about the proof on pp. 131-2, but it turns out
that employment in the R&D sector is too low by a factor of 1-φ
under decentralized exchange
o This is interesting because it says that central planning will be most beneficial
when ideas are the most substitutable
137
Implications
• If an outcome is not Pareto-optimal, it is because there are some
identifiable externalities. In this model
o Final goods producers earn consumer surplus from buying the innovations of
the R&D sector
o Patent-holders are hurt by innovation if the innovation is a close substitute
 The borderline is φ > ½
o Existing patents make new innovation easier, but require no compensation
from the R&D sector.
138
Extensions
• P. Romer’s paper includes capital
o Capital has only level effects if it is not involved in R&D, but growth effects if it
is involved in R&D
• The exponent of 1 on A in dA/dt = BLA(t)A(t) seems to be too
large
o Smaller values lead to results more like semi-endogenous growth models
• There is an alternative model in which technological improvement
leads to better not different inputs – but it doesn’t make too much
difference to the results other than to uncover some other
microeconomic causes of growth
139
3.6 Empirical Application: Time-Series Tests of
Endogenous Growth Models
• Fully endogenous growth models give the most radically new results,
so initial tests looked at these.
140
• P. Romer asserted in the seminar I saw at the University at Buffalo in
1986-7 that growth rates appeared to be accelerating
o Also, the assertion of Robin Hanson about how output will behave when our
“avatars” can control capital and become effective labor suggests jumps in
growth rates rather than smooth acceleration.
141
• Jones asserts that because exogenous variables can have growth
effects (in addition to level effects) in fully endogenous growth
models, that growth rates should display this by not being stationary
around a central value.
o This runs into the two problems I mentioned earlier in the semester
 Tests of non-stationarity have low power
 Rejecting stationarity wouldn’t imply that fully endogenous growth are correct
142
• It turns out that Jones found a small upward trend in growth rates (as
indicated by P. Romer), but with a very wide confidence interval.
o So, is there no trend, or
o A huge trend we don’t have a powerful enough test to find?
143
The Magnitudes and Correlates of Changes In
Long-Run Growth
• Jones shows that the investment share has been rising without
growth rates following.
o AK models indicates that the two should rise together
• Jones also shows that employment in the R&D sector has gone up
quite a lot in developed economies, without their per capita growth
rates rising
144
Discussion
• Jones argues that it is unlikely that there are increasing returns to
scale in research and development
o We’ve spend so much more on these over the last 50 years that growth rates
would’ve gone way up if this case were true
o Jones suggests that returns to research and development are decreasing
• That γ + β + θ < 1 in Section 3.3
145
Discussion
• Others argue that the number of sectors in which R&D is performed
increases with the size of the economy
o Each sector still has increasing-returns-to-scale, but doesn’t get the resources
for that to make much difference
 These models require implausible parameter restrictions
146
Discussion
• With decreasing returns to scale, increases in R&D share or the saving
rate do improve growth rates, but the effect is transitory
o Remember that this doesn’t necessarily mean it will be short
o This is a transitory effect on growth rates. There will still be a permanent
effect on the levels of output.
147
Discussion
• These results point away from fully endogenous growth and towards
semi-endogenous growth models.
o These are models in which there are decreasing returns to investment in
innovation
 It’s still good, but there are limits to how much of it we can sensibly do
148
3.7 EMPIRICAL APPLICATION: POPULATION GROWTH
AND TECHNOLOGICAL CHANGE SINCE 1 MILLION B.C.
149
Population Growth and Technological Change
Since 1 Million B.C.
• Really only to the onset of per capita income growth
• In a subsistence society, endogenous growth (pushed by population
growth) makes two predictions
o Population growth rates rise with population
o Population density, in isolated regions, is proportional to the land available to
support the population
 Alternatively, more advances are made in more populous regions, but measuring this
would require evaluating which advances were actually important
150
A Simple Model (with θ=1)
• Cobb-Douglas production with fixed land, T:
o Y(t)=Tα[A(t)L(t)](1-α)
• Technological growth is population driven:
o dA/dt=BL(t)A(t)
• Per capita incomes are constant at a subsistence level, y
o Then: y=Tα[A(t)L(t)](1-α)/L(t)
oOr: L(t) is proportional to A(t)(1-α)/αT
oSo: (dL/dt)/L=[(1-α)/α]{(dA/dt)/A}=[(1-α)/α]BL(t)
151
Results
• Regression results show a good linear fit between growth rates and
levels of population prior to 1700
• Regression results also indicate population density is highest in larger
regions
152
Discussion
• This offers a new “solution” to a set of outstanding anthropological
problems:
o Why were dense areas important?
 Why were “the hills” filled with backward people all over the globe
 How could China make so many advances without becoming rich?
 Why did the Islamic world decline?
 There were always barbarians, but why did barbarian hordes always seem to arrive
equipped with better technology?
153
Population Growth vs. Growth In
Income Per Person over the Very Long-
Run
• Why did incomes explode after 1700 then?
o Because population growth rates can’t change as quickly as
technological growth rates, and eventually the latter
swamped the former
• Why won’t this persist?
o People prefer to be less fertile when richer
154
3.8 Models of Knowledge Accumulation and
the Central Questions of Growth Theory
• Growth
o Good: the Solow residual is very large, so endogenizing technology growth is a
good thing
• Cross-Country Income Differences
o Bad: the huge differences in income would need to be explained by huge
differences in technology
o Bad: technology is non-rival, so why can’t capitalists just take it overseas for
higher returns?
155
Macroeconomics 2
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Model ini adalah versi yang disederhanakan dari model

Seperti dalam model Solow, tingkat Demikian pula, kami terus

3.2 The Model without Capital (3.1)

The Dynamics of Knowledge Accumulation

the growth rate of the growth rate of A

Untuk mendeskripsikan lebih lanjut bagaimana tingkat pertumbuhan A berperilaku

Untuk mendeskripsikan lebih lanjut bagaimana

Untuk mendeskripsikan lebih lanjut bagaimana

max 𝑔𝐴ሶ > 0

The Importance of Returns to Scale to Produced Factors

The Importance of Population Growth

The Dynamics of Knowledge and Capital

The Dynamics of Capital

Taking logs of both sides and differentiating with respect

FIGURE 3.5 The dynamics of the growth rate of

The Dynamics of Knowledge(A) Similarly, equation (3.7),

Similarly, dividing both sides of equation (3.2),

The Dynamics of Knowledge(A) 𝑛

𝑔𝐴ሶ = 0 𝑔𝐾 𝑡 + 𝑛 + ( − 1)𝑔𝐴 𝑡 = 0 𝑛

FIGURE 3.6 The dynamics of the growth rate of

the degree of returns to scale to K and A 𝑔𝐴ሶ > 0

degree of returns ∶  +  < 1

degree of returns ∶  +  > 1

degree of returns ∶  +  = 1 𝑎𝑛𝑑 n = 0

FIGURE 3.8 The dynamics of the growth rates

degree of returns ∶  +  > 1

3.4 The Nature of Knowledge and the

Support for Basic Scientific Research

Private Incentives for R&D and Innovation

Alternative Opportunities for Talented Individuals

Ketika Learning-by-Doing adalah sumber kemajuan teknologi, kecepatannya akumulasi

When learning-by-doing is the source of technological progress, the rate

Persamaan (3.22) (3.23), bersama-sama dengan (3.3)

Seperti dalam model Solow, tingkat

Dalam model akumulasi pengetahuan tanpa modal di Bagian

Sekali lagi, kasus yang mendapat perhatian khusus adalah φ = 1

(3.24) Menjadi (3.26)

Oleh karena itu, akumulasi modal diberikan oleh (3.27)

3.5 The Romer Model

Pada bagian ini kami mempertimbangkan

The specific assumption about how the inputs

Ungkapan ini memiliki dua implikasi kritis. Pertama, ada

where we have used the fact that must equal 112

Equation (3.32) shows that the holder of the patent on an

(3.33) The production function for new ideas is linear in the

Thus the representative individual’s lifetime utility is

where r is the interest rate, X(0) is initial wealth per

Solving the Model

Given our assumption that LA is constant and the

Equation (3.34) for knowledge creation,

implies that if LA is constant, A(t )/A(t ) is just BLA.

Once we know the growth rate of consumption,

These profits grow at the growth rate of w

where θ is the coefficient of relative risk aversion. With

They are discounted at rate r

The present value of the profits earned from the discovery

Solving this equation for LA yields

We are now in a position to find the equilibrium value of (3.43)

The amount of R&D need not be strictly positive, however.

Finally, since the growth rate of output is

Third, an increase in productivity in the R&D

Finally, an increase in the size of the (3.45)