Increasing returns and long-run growth
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This paper presents a fully specified model of long-run growth in which knowledge is assumed to be an input in production that has increasing marginal productivity.It is essentially a competitive equilibrium model with endogenous technological change.In contrast to models based on diminishing returns, growth rates can be increasing over time, the effects of small disturbances can be amplified by the actions of private agents, and large countries may always grow faster than small countries.Long-run evidence is offered in support of the empirical relevance of these possibilities. This paper is based on work from my dissertation (Romer 1983). An earlier version of this paper circulated under the title "Externalities and Increasing Returns in Dynamic Competitive Analysis.' At various stages I have benefited from comments by James J.
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Endogenous growth theory emphasizes that internal factors such as human capital, innovation, and investment are key drivers of long-term growth.
“the endogenous Growth theory (lucas, 1988; romer, 1986) emphasizes that internal factors-such as human capital, innovation, and investment-are key drivers of long-term growth.”
From Remittance–economic growth linkage in Africa: the roles of financial development and inflation (2025) · cites this paper as romer, 1986
The Introduction describes long-run growth as driven primarily by the accumulation of knowledge through research and investment, supporting the innovation and investment parts of the claim. But Romer’s model does not identify human capital as a key driver; the discussion of human capital in Section II concerns an earlier model. (LLM, conf=0.82)
Experimental — accuracy not yet measuredRomer and others argued that increasing returns associated with economic applications of knowledge help account for growth rates greater than measured increases in capital and labor inputs.
“Romer and others argued that increasing returns associated with economic applications of knowledge could help account for the anomaly.Unlike capital and labor, many aspects of knowledge are non-rivaltheir use in one firm does not prevent their use in another.Thus, a single gain in knowledge can be applied in many settings, and can lead to dramatic improvements in productivity.”
From Increasing Returns, Path Dependence, and the Study of Politics (2000) · cites this paper as Romer 1986
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- Authors
- Romer, P. M.
- Corresponding author
- Romer, Paul M.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1986-10
- Volume
- 94
- Issue
- 5
- Pages
- 1002-1037
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2168605160
- Cited by
- 20,149
- References
- 34
- Citations by year
- 2026: 565 · 2025: 765 · 2024: 770 · 2023: 879 · 2022: 857 · 2021: 919 · 2020: 867 · 2019: 816 · 2018: 827 · 2017: 665 · 2016: 661 · 2015: 756 · 2014: 754 · 2013: 787 · 2012: 695
- FWCI
- 105.00
- Type
- journal article
- Language
- en
- Open access
- green
- www.dklevine.com
- Locations
- Journal of Political Economy (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Funders
- National Science Foundation (8320007)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic theories and models
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
- Keywords
- increasing returns, long-run economic growth, endogenous technological change, competitive equilibrium, diminishing returns, growth rate
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