From Solow to Romer: Teaching Endogenous Technological Change in Undergraduate Economics

Chu, Angus C. (2015): From Solow to Romer: Teaching Endogenous Technological Change in Undergraduate Economics.

Abstract

Undergraduate students learn economic growth theory through the seminal Solow model, which takes the growth rate of technology as given. To understand the origin of technological progress, we need a model of endogenous technological change. The Romer model fills this important gap in the literature. However, given its complexity, undergraduate students often find the Romer model difficult. This paper proposes a simple method of teaching the Romer model. We add three layers of structure (one at a time) to extend the familiar Solow model into the less familiar Romer model. First, we incorporate a competitive market structure into the Solow model. Then, we modify the competitive market structure into a monopolistic market structure. Finally, we introduce an R&D sector that creates inventions.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth, endogenous technological change, the Romer model
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A22 - Undergraduate; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights

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