A Welfare Analysis of Growth Models with Endogenous Innovation

In this paper, I study the welfare properties of growth models with endogenous innovation, knowledge externalities, and monopoly pricing of new goods. Since useful policy prescriptions cannot be inferred from a balanced growth analysis, welfare is analyzed for transition paths. I provide a general comparison of the market equilibrium path and the optimal path for any initial conditions. To elicidate the welfare properties of the model, I present a constrained optimality result for the market equilibriu