A Nonscale Growth Model with R&D and Human Capital Accumulation

This paper presents an endogenous growth model that includes research and de-velopment and human capital accumulation. The model’s speci…cation builds on the R&D-based structure of Romer’s [1990] model and introduces two functions: (1) A speci…cation for the production of new designs that assumes no externalities and no inventions before time zero; and (2) A speci…cation for the accumulation of human capital technically similar to that in Lucas [1988]. The model displays two main results. The …rst is that it eliminates the scale-e¤ects prediction which is common to most R&D-based growth models, but which is not empirically supported. Secondly, the model o¤ers a new prediction that growth depends positively on the ratio of …nal-good workers to researchers. Thus the model provides a theoretical explanation as to why developed countries have had rising numbers of researchers but not rising growth rates in the twentieth century