Answer to Question #316991 in Macroeconomics for shefa

Question

 In the endogenous growth model of Romer (1990), workers can, without costs,

shift between the production of inputs and R&D. Imagine instead that the fraction

of researchers in the economy is a fixed parameter that cannot be changed. Then,

conjecture what happens to the responsiveness of the growth rate in the economy to

the degree of substitutability among the varieties of ideas, φ.

Answer 1

with a fixed number of R&D staff that can not be changed, the rate of development remains constant.