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  • Lutz G. Arnold (a1) and Wolfgang Kornprobst (a1)

This paper replaces increasing product variety with quality upgrading in the Romer model [Romer, Paul M., Journal of Political Economy 98 (1990), S71–S102]. We show that the range of parameters for which a steady state exists can be divided into two subspaces with well-behaved comparative statics and saddle-point dynamics in one subspace, but with “perverse” comparative-statics properties and either equilibrium indeterminacy or instability in the other subspace. These results for the closed economy can also be used to characterize the dynamics of the M-country open-economy version of the model.

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Address correspondence to: Lutz G. Arnold, Economic Theory, Department of Economics, University of Regensburg, 93040 Regensburg, Germany; e-mail:
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Philippe Aghion and Peter Howitt (1992) A model of growth through creative destruction. Econometrica 60, 323351.

Philippe Aghion and Peter Howitt (2006) Joseph Schumpeter Lecture. Appropriate growth policy: A unifying framework. Journal of the European Economic Association 4, 269314.

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Lutz G. Arnold (2000b) Stability of the market equilibrium in Romer's model of endogenous technological change: A complete characterization. Journal of Macroeconomics 22, 6984.

Lutz G. Arnold (2006) The dynamics of the Jones R&D growth model. Review of Economic Dynamics 9, 143152.

Jess Benhabib , Roberto Perli , and Danyang Xie (1994), Monopolistic competition, indeterminacy and growth. Ricerche Economiche 48, 279298.

Michael B. Devereux and Beverly J. Lapham (1994) The stability of economic integration and endogenous growth. Quarterly Journal of Economics 109, 299308.

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Charles I. Jones (1995) R&D-based models of economic growth. Journal of Political Economy 103, 759784.

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Sergey Slobodyan (2007) Indeterminacy and stability in a modified Romer model. Journal of Macro-economics 29, 169177.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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