The Impact of Product Quality Improvement on Economic Growth in an Endogenous Growth Model: Emphasizing on Innovation in the Production Process

Determining optimal path of economic variables in order to reach a specific target has great importance in optimal control method. In this study, with the use of Schumpeter's endogenous growth model, we analyse the role of invention, innovation and investment in research and development on economic growth. Also, through dynamic optimization method the path of Iranian economic growth in long run was obtained. The results of simulation with using indicates that optimal growth has positive relation with return on research and development, product quality, scale of economy and the period of planning. Also, optimal growth has negative relation with the time preference.