Abstract
The technological progress is stated as the engine of economic growth in the neoclassical growth model, but some models like Solow model, always set the technological progress as an exogenous variable with a constant rate g. Romer model indigences the technological progress, and also shows the relationship between population growth and economic growth, with the effect of labor force allocation taken into account. This assay is trying to analyze the micro foundations of the Romer model 1990, assess its conclusions, and discuss the allocation of labor in the model.
In 1980s, after the better understanding of modeling imperfect competition in a general equilibrium setting, economists was trying to develop growth models with micro foundations to explain the technology progress as an endogenized variable. Romer made an important contribution for explaining how to construct an economy of profit-maximizing agents that endogenizes technological progress, in 1990. The model consists of three sectors: the final goods sector, the intermediate goods sector and the R&D sector.
