Competition and Growth in an Endogenous Growth Model with Expanding product Variety without Scale Effects Revisited

Bianco, Dominique (2009): Competition and Growth in an Endogenous Growth Model with Expanding product Variety without Scale Effects Revisited.

Abstract

This paper shows that the results of Bianco (2006) depend critically on the assumption that there are no difference between the intermediate goods share in final output, the returns of specialization and the degree of market power of monopolistic competitors. In this paper, we disentangle the market power parameter from the intermediate goods share in final output and the returns to specialization. The main result of this paper is the death of the inverted-U shape relationship between competition and growth. Indeed, we find a decreasing relationship between competition and growth which is due to the composition of two negative effects on growth : resource allocation and Schumpeterian effects.

• Item Type: MPRA Paper
• Language: English
• Keywords: Endogenous growth, Horizontal differentiation, Technological change, Imperfect competition.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

References

Bianco, D. (2006): “Competition and Growth in an Endogenous Growth Model with Expanding Product Variety without Scale Effects," Brussels Economic Review/Cahiers Economiques de Bruxelles, 49(3), 73-84.

Bianco, D. (2007): “An inverted-U Relationship between Product Market Competition and Growth in an Extended Romerian Model," Rivista di Politica Economica, (September-October), 177-190.

Dinopoulos, E., and P. Thompson (1999): “Scale Effects in Schumpeterian Models of Economic Growth," Journal of Evolutionary Economics, 9(2), pp. 157-185.

Gancia, G., and F. Zilibotti (2005): “Horizontal Innovation in the Theory of Growth and Development," in Handbook of Economic Growth, vol. 1, pp. 111-70. Elsevier Science, Amsterdam, North Holland.

Grossman, G. M., and E. Helpman (1991): Innovation and Growth in the Global Economy. MIT Press, Cambridge, Mass. and London.