growth theory captures that knowledge accumulates through the arrival
of innovations which are an outcome of profit … products, N
t
, is a measure of the economy’s knowledge stock in t.As
the focus is on horizontal innovations, quality indices … given by
y
t
≡
Y
t
L
t
= N
t
(
˜
k
t
)
γ
(l
Y
t
)
1−γ
, (2)
where
˜
k ≡ K/(NL) is the knowledge-adjusted capital-labor ratio …