CONTENTS
Acknowledgments = xi
Introduction = 1
Change and Innovation = 1
Why This Book? = 2
Who Is the Book For? = 9
1 Toward Endogenous Growth = 11
1.1 The Neoclassical Model of Exogenous Growth = 11
1.2 Extension：The Cass－Koopmans－Ramsey Model = 17
1.3 Initial Attempts to Endogenize Technology = 22
1.4 The AK Approach to Endogenous Growth = 24
1.5 The Solow－Swan Model versus the AK Approach：The Empirical Evidence = 29
1.6 Monopoly Rents as a Reward of Technological Progress = 35
Appendix：Dynamic Optimization in Continuous Time = 39
Problems = 44
2 The Schumpeterian Approach = 53
2.1 A Basic Setup = 53
2.2 Steady－State Growth = 57
2.3 Welfare Analysis = 61
2.4 Uneven Growth = 63
2.5 Discussion = 65
2.6 Some Immediate Extensions of the Basic Schumpeterian Model = 67
2.7 Summary = 78
Problems = 80
3 Innovation and Capital Accumulation = 85
3.1 Multisectors = 85
3.2 Introducing Capital = 93
3.3 Summary = 113
Appendix 1：The Invariant Cross－Sectoral Distribution of Relative Productivities = 115
Appendix 2：Research Arbitrage and Labor Market Equilibrium in the Multisector Economy = 116
Problems = 116
4 Growth and Unemployment = 123
4.1 Two Opposite Effects of Growth on Unemployment = 123
4.2 The Effect of Intersector Complementarities = 129
4.3 Innovation－Driven Growth = 133
4.4 Learning by Doing = 137
4.5 Stochastic Matching = 140
4.6 Summary = 142
Appendix：Some Details of Stochastic Matching = 144
Problems = 145
5 Endogenous Growth and Sustainable Development = 151
5.1 Optimal Growth in the AK and Schumpeterian Frameworks = 152
5.2 The Notion of Sustainable Development = 155
5.3 The Analysis of Sustainable Development = 158
5.4 Summary = 164
Appendix 1：Existence of Steady－State with Environmental Pollution = 165
Appendix 2：Existence of Steady－State with Nonrenewable Natural Resources = 169
6 Learning by Doing and Secondary Innovations = 173
6.1 The Basic Model = 175
6.2 Internalized Learning by Doing = 183
6.3 Research and Development = 187
6.4 Preliminary Thoughts on Growth and the Organization of R&D = 190
6.5 Toward More Radical Fundamental Innovations = 193
6.6 Summary = 193
Problems = 195
7 Market Structure = 205
7.1 Introduction = 205
7.2 Barriers to Entry in Research = 206
7.3 Introducing Agency Considerations = 208
7.4 From Leap－Frogging to Step－by－Step Technological Progress = 216
7.5 Research and Development = 220
7.6 Summary and Conclusions = 223
Problems = 225
8 Growth and Cycles = 233
8.1 Introduction = 233
8.2 A Few Historical Benchmarks = 234
8.3 From Cycles to Growth = 236
8.4 From Growth to Business Cycles：Schumpeterian Waves Revisited = 243
8.5 Measurement Problems = 266
8.6 Summary = 269
Problems = 270
9 Distribution and Political Economy = 279
9.1 The Effects of Inequality on Growth = 280
9.2 Technological Change as a Source of Inequality = 298
9.3 The Political Economy of Technological Change：Vested Interests as a Source of Stagnation = 313
9.4 Summary = 316
Appendix：Proof of Proposition 9.1 = 319
Problems = 321
10 Education = 327
10.1 The Lucas Approach = 329
10.2 The Nelson－Phelps Approach = 338
10.3 Microfoundations of Education Policy：An Informal Look at Some Preliminary Contributions = 350
10.4 Summary = 354
Problems = 357
11 Growth in Open Economies = 365
11.1 Introduction = 365
11.2 Openness and Growth：An Overview = 365
11.3 Opening Up the Romer Model = 372
11.4 Dynamic Comparative Advantage = 375
11.5 Learning by Doing and Comparative Advantage = 383
11.6 Empirical Evidence = 389
11.7 Conclusion = 392
11.8 Summary = 393
Problems = 396
12 Testing for Endogenous Growth = 403
12.1 Some Criticisms of Endogenous Growth Theory = 404
12.2 An Augmented Schumpeterian Model = 407
12.3 Back to the Empirical Critiques of Schumpeterian Growth Theory = 415
12.4 A Multicountry Model = 420
12.5 The Main Observational Implications of Schumpeterian Growth Theory = 425
12.6 A Preliminary Attempt at Testing the Schumpeterian Paradigm = 431
12.7 Summary = 434
Appendix：On Some Problems in Measuring Knowledge－Based Growth = 435
A.I A Tentative Definition = 436
A.2 Measuring Output, Productivity, and Knowledge = 437
A.3 A Formal Model = 442
A.4 Conclusion = 447
13 Organizing R&D I：The Private Management of Innovation = 449
13.1 Should Research Be Vertically Integrated? = 450
13.2 The Organization of Research within Integrated Firms = 460
13.3 Financing R&D = 468
13.4 Summary = 472
Appendix：Growth and the Decentralization of Activities within Firms = 474
A.1 ModeUng the Allocation of Authority within an Organization = 474
A.2 The Basic Trade－off between the Principal's Loss of Control and the Agent's Initiative = 476
A.3 The Optimal Scope of Centralization = 477
Problems = 480
14 Organizing R&D II：Public Aid to Innovation = 485
14.1 Targeted R&D Subsidies = 486
14.2 Untargeted Subsidy Policies = 489
14.3 Delegating the Financing of R&D Inputs to Industries = 490
14.4 Using the Existing Patent System to Optimally Reward R&D Output = 491
14.5 On the Design of Patent Legislation = 494
14.6 Summary = 504
Problems = 507
Solutions = 515
Chapter 1 = 515
Chapter 2 = 536
Chapter 3 = 545
Chapter 4 = 554
Chapter 6 = 562
Chapter 7 = 574
Chapter 8 = 581
Chapter 9 = 598
Chapter 10 = 607
Chapter 11 = 622
Chapter 13 = 632
Chapter 14 = 642
References = 665
Index = 689
