This paper constitutes a first attempt at studying the transition dynamics of the Tsur and Zemel (2007) continuous time endogenous growth framework in which knowledge evolves according to the Weitzman (1998) recombinant process. For a specific choice of the probability function characterizing the Weitzman recombinant process, we find a suitable transformation for the state and control variables...

We extend the basic Schumpeterian endogenous growth model by allowing incumbents to undertake innovations to improve their products, while entrants engage in more “radical” innovations to replace incumbents. Our model provides a tractable framework for the analysis of growth driven by both entry of new firms and productivity improvements by continuing firms. The model generates a non-degenerate...

This paper studies maximin paths in the context of a standard exhaustible resource model. Under the assumption that the resource is important in production, it establishes the efficiency and uniqueness of non-trivial maximin paths. It uses these results to study the nature of the maximin value and policy functions. The value function is shown to be differentiable with respect to the initial res...

Two traditional explanations for structural changes are sector-biased technological progress and non-homothetic preferences. This paper integrates both into an otherwise standard growth model and quantitatively evaluates them vis-a-vis time series. The exercise identifies a set of puzzles for standard theories: (i) the model cannot account for the steep decline in manufacturing and rise in serv...

We show that a simple and intuitive three-parameter equation fits remarkably well the evolution of the gross domestic product (GDP) in current and constant dollars of many countries during times of recession and recovery. We then argue that this equation is the response function of the economy to isolated shocks, hence that it can be used to detect large and small shocks, including those which ...

The article gives new answers to the two following questions: One, what can be a potential source of the twin-peaks of economic growth? Two, why were some of the countries that were believed to belong to the group of low steady state countries (like Taiwan, South Korea, Japan, etc.) able to reach a convergence path which led them to a high steady state? We endogenize the time preference rate vi...

During the late 1990s the market value of businesses grew at 15% per year. It is hard to reconcile such fast growth with the observed rates of investment in physical capital and R&D. We therefore propose a model in which new ideas are privately owned, but discovering them does not require resources. In our model it is possible that market value rises very rapidly without drastic changes in fact...

Past experiences and social forces have been incorporated into tastes in order to analyze various microeconomic issues. We use these “extended preferences” to model the making of standard-of-living aspirations and study their effect on macroeconomic variables. We concentrate first on consumption behavior when there is habit formation. Such behavior is in accordance with several empirical facts ...

This paper presents an endogenous growth model in which some firms devote resources to developing higher quality products (innovative R&D) and other firms devote resources to copying these products (imitative R&D). Although consumers benefit from the knowledge created by both types of R&D activities, only innovative R&D subsidies lead to faster economic growth and imitative R&D subsidies actual...

Empirical attempts to measure the speed of convergence -the rate at which a country's per capita income approaches its steady state relative to its distance from its steady state -have started from the assumption that it is constant. In contrast, neoclassical models of capital accumulation usually predict that the speed of convergence decreases as income approaches its steady state. Estimating ...