Innovation and growth from a schumpeterian perspective

In this lecture we argue that important aspects of the growth process cannot easily be accounted for using models where capital accumulation is the main source of growth. The four aspects we emphasize in this lecture are: the transition trap, secular stagnation, the recent rise in top income inequality, and firm dynamics. The lecture argues that by contrast these aspects can be addressed by the Schumpeterian growth paradigm in which: (i) growth results primarily from innovation; (ii) innovation responds to incentives shaped by economic policies and institutions; (iii) new innovations replace old technologies (creative destruction).