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Endogenous technological change: a note on stability

Arnold, Lutz G.



Abstract

This paper demonstrates that the steady-state solution of the optimal-growth problem in Romer's (1990) model of endogenous technological change is globally saddle-point stable. Surprisingly, the proof of this result is trivial. Interest in the optimal growth path is justified by the fact that there is a (unique) combination of production and R&D subsidies by means of which the optimal growth path is attained as a market equilibrium.


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