Taste for variety: Model of Grossman and Helpman.

Variety expansionIntroduction◮ In the end of 1980-s economists mainly agreed upon theunsatisfactory results of neoclassical growth theory;◮ According to empirical findings,less than 50 percent of growthmight be attributed to the growing capital - labour ratio;◮ Hence, the half of growth rate is due to Solow residual;◮ Thus the models endogenizing technology as a source ofgrowth emerged;◮ The first generation of such models were of taste-for-varietytype;◮ The main idea of these was to find some source of growth,other that capital productivity (K/L ratio);◮ The model of Grossman and Helpman achieved nice formaldescription of these ideas in 1990.