Lk. Cheng et E. Dinopoulos, A MULTISECTORAL GENERAL EQUILIBRIUM-MODEL OF SCHUMPETERIAN GROWTH ANDFLUCTUATIONS, Journal of economic dynamics & control, 20(5), 1996, pp. 905-923
This paper builds a dynamic multisectoral general equilibrium model of
Schumpeterian growth and fluctuations based on the endogenous introdu
ction of new products. The set of technological opportunities determin
es the degree of product- quality upgrading and consists of breakthrou
ghs and improvements the latter exhibiting diminishing returns. If the
degree of diminishing returns to technological improvements is low, t
hen there is no steady-state equilibrium but cycles of breakthroughs a
nd improvements. We analyze two symmetric stable patterns of innovatio
n which generate endogenous cycles and growth. There is a negative cor
relation between the duration of each cycle and the long-run growth tr
end.