Entrepreneurial Innovation And Sustained Longrun Growth Without Weak Or Strong Scale Effects
Source: CESifo Group
R&D-based growth theory suggests that a larger population size raises either the long-run rate of economic growth ("Strong scale effect") or the level of per capita income ("Weak scale effect"), with far-reaching policy implications. However, for modern times there is little empirical support for strong scale effects and evidence in favor of weak scale effects is mixed, at best. This paper develops a simple overlapping-generations framework with endogenous occupational choice of heterogeneous agents and entrepreneurial innovations in which any form of scale effect is absent.