Non-Scale Models of R&D-based Growth: The Market Solution

Abstract The market solution of a general R&D-based endogenous growth model is developed. The model is general in two respects: First, general formulations are used and restrictions are only introduced provided that these become necessary. Second, each factor of production (labour, capital and technological knowledge) is allowed to be productive in each sector (final output, capital goods and R&D). Since the resulting R&D-based growth model encompasses a large number of specific models, it can be viewed as a summary of this strand of the literature. The complete dynamic system as well as the balanced growth rates are derived. By employing numeric techniques, the gap between the decentralised and the centralised balanced growth path as well as the transitional dynamics implications are investigated.