Investment in R&D is positively associated with the variance of sales growth and, to a lesser extent, employment growth. The magnitude of this effect has not increased in recent decades, however.

We present results from quantitative exercises using the Lucas and Romer endogenous growth models, from which we calculate welfare losses from the distortions presented in the Romer model. Moreover, comparing the models to data, we show that an economy governed by the Romer model would attain a...