This week’s homework is solely comprehension based on Paul Romer’s famous 1990 paper here http://pages.stern.nyu.edu/~promer/Endogenous.pdf. Prepare answers to each of the questions below. No mathematics or computing is required for this week’s homework. It will be due on Tuesday 15 Sep.
- What is a rivalrous good; what is an excludable good?
- What sort of goods does Romer suggest contribute to endogenous economic growth?
- Is human capital rivalrous?
- What is the replication argument for constant returns to scale?
- “If a nonrival input has productive value, then output cannot be a constant-returns-to-scale function of all its inputs taken together.” - What does Romer mean by this?
- A design is partly excludable. Why is it not fully excludable in Romer’s model?
- Do designers recoup the full marginal value of their designs?
- The model proposes some relationships should hold:
- What is the impact of a reduction in the interest rate on the value of ideas, and on research? Do you see this in the data?
- What is the impact on the returns to research of an increase in the population? Why?
- What is the impact of an increase in the stock of human capital on the returns to research? Why?
- Savageland, a new country founded by me, is negotiating trade relationships with Malaysia (population 30.5m) and Singapore (population 5.5m). Both countries have about the same GDP. Which trade relationship would be expected to have a larger impact on the returns to research? Why?
- Does too little or too much research get done in the Romer model?