Communication, Innovation, and Growth

The communication of ideas fosters technological progress and prevents regress. This paper develops a growth model wherein an economy's technology is endogenous to agents' communication decisions. In equilibrium, there is too little communication and insufficient risk-taking relative to the first best. The model can generate an abrupt take-off of output growth without an exogenous "catastrophe." A numerical example illustrates such a take-off. In that example, the endogenous fall in the cost of communication leads to the acceleration of the growth rate of output by facilitating the transmission of knowledge and by encouraging risk-taking.