Knowledge, Industry, and the Endogenous Growth of Nations

An analytically tractable and flexible model of economic growth that builds a bridge between short-run and long-run macroeconomics.

The pursuit of economic growth requires an understanding of the mechanisms that drive it, the policies that support it, and the institutions that allow it to flourish. In Knowledge, Industry, and the Endogenous Growth of Nations, Pietro Peretto presents a theory of economic growth that builds a bridge between short-run and long-run macroeconomics. His industrial-organization-based theory of endogenous growth has at its core firms and the knowledge-accumulation activities they undertake in direct competition with the other firms active in their industry. Peretto’s framework is especially useful to researchers and policy practitioners tackling questions that thus far have resisted progress because they are inherently dynamic.

In many cases, Peretto’s dynamic macroeconomic models, with their industrial organization core, can be solved analytically. Though not alone in proposing models with firms at their core, Peretto is notable for his focus on tractability and transparent analytical results. Extensions include endogenous markups and a more general notion of market power, technological spillovers across firms, government interventions in the economy such as public R&D and fiscal policy, natural resources, and foreign trade.