Are Nonconvexities Important for Understanding Growth?
14 Pages Posted: 4 Apr 2004 Last revised: 11 Dec 2021
Date Written: February 1990
Abstract
Everyday experience and a simple logical argument show that nonconvexities are essential for understanding growth. Compared to previous statements of this well known argument, the presentation here places more emphasis on the distinction between two of the fundamental attributes of any economic good: rivalry and excludability. It also emphasizes the difference between public goods and the technological advances that are fundamental to economic growth. Like public goods, technological advances are rionrival goods. Hence, they are inextricably linked to nonconvexities. But in contrast to public goods, which are nonexcludable, technological advances generate benefits that are at least partially excludable. Hence, innovations in the technology are for the most part privately provided. This means that nonconvexities are relevant for goods that trade in private markets. Consequently, an equilibrium with price-taking in all markets cannot be sustained. Concluding remarks describe some of the recent equilibrium growth models that do not rely on price-taking and highlight some of the implications of these models.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Learning by Doing and the Dynamic Effects of International Trade
By Alwyn Young
-
Quality Ladders in the Theory of Growth
By Gene M. Grossman and Elhanan Helpman
-
Quality Ladders and Product Cycles
By Gene M. Grossman and Elhanan Helpman
-
Comparative Advantage and Long-Run Growth
By Gene M. Grossman and Elhanan Helpman
-
By Gene M. Grossman and Elhanan Helpman
-
Capital Goods Imports and Long-Run Growth
By Jong-wha Lee
-
Employment Protection, International Specialization, and Innovation