Combining (3.11) with Proposition 1 allows one to sign the impact of parame-
ter changes on the average growth rate. Increases in the arrival parameter, the
size of innovations, the size of skilled labor endowment, and (in the Cobb-
Douglas example) the degree of market power all raise AGR. Increases in the
rate of interest lower it. The parameter changes have the same qualitative effect
on VGR as on AGR. The effects are intuitive and straightforward. The effect of
market power, combined with the finding that a minimal degree of market
power is needed before growth is even possible, underlines the importance of
imperfect competition for the growth process.