Information Carrier Technology and Endogenous Growth

We build a novel endogenous growth model with information carrier technology, in which knowledge may be lost in storage and dissemination. In the asymptotic balanced growth path equilibrium, we establish two main findings. First, the growth rate of information carrier technology and the population growth rate are substitutes in determining the growth rate of output per capita and the proportion of labor allocated to research and development. Second, an increase in the population growth rate or the growth rate of information carrier technology will induce labor allocation bias toward research and development. Model calibration for 2,100 years indicates that along the transition path, innovation starts to grow in year 1780, and output per capita takes off on sustained growth 17 years later, which corresponds to the first Industrial Revolution. Our results shed light on the crucial role of information carrier technology in economic growth and provide a new explanation for the transition of the world economy from stagnation to growth