Essays on economic growth

This dissertation consists of two chapters and explores issues in the area of endogenous growth theory. In the first chapter government policy is introduced in the model of Romer (1990). The main result is that the growth rate of the planned economy exceeds that of the decentralized economy. Two distortions—sources of market failure—are identified as the reasons for this discrepancy. The first-best government policy is considered next, and it is found to consist of a combination of two subsidies. Then, an extension of the model is introduced that brings about another reason for the rate of growth of the decentralized economy to fall short of the socially optimal rate. Policy is again discussed regarding this new inefficiency and a third subsidy is introduced as the optimal solution to the problem.; The second chapter takes explicitly into account the link between human capital accumulation and technological progress. Human capital accumulation in the spirit of Lucas (1988) is introduced into the R&D-based model of Romer (1990). The steady-state solution for the decentralized economy follows a growth-accounting exercise which provides quantitative information regarding the sources of growth. The model is calibrated to data and parameter estimates from various studies. It turns out that human capital accumulation explains a significant part of the growth influence of the Solow residual. The chapter concludes with an analysis of the long-run effects of changes in selected model parameters.