Growth: With or Without Scale Effects?

Abstract

December 15, 1998 -- Version 1.0 The property that ideas are nonrivalrous leads to a tight link between idea-based growth models and increasing returns to scale. In particular, changes in the size of an economy's population generally affect either the long-run growth rate or the long-run level of income in such models. This paper provides a partial review of the expanding literature on idea-based models and scale effects. It presents simple versions of various recent idea-based growth models and analyzes their implications for the relationship between scale and growth. Prepared for the AEA Meetings, January 3, 1999. Forthcoming in the AER Papers and Proceedings, May 1999.

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