Innovation, growth, and welfare-improving cycles (Q1290838)

The authors study an interesting macroeconomic model of a two-sector economy with a final good sector and an intermediate goods sector. Intermediate goods are used to produce the final good. A production factor in the intermediate goods sector is labour, limited resources of which may be appropriate for the purpose of production or innovation. In the conditions of free market innovation activity increases labour productivity. The authors analyse equilibrium existence conditions and prove that in the model there are stationary innovation cycles in the process of economy growth.