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An Inverted U-Relationship between Product Market Competition and Growth in an Extended Romerian Model: A Comment

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  • Dominique Bianco

Abstract

This paper shows that the results of Bucci (2005) 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.

Suggested Citation

  • Dominique Bianco, 2007. "An Inverted U-Relationship between Product Market Competition and Growth in an Extended Romerian Model: A Comment," Rivista di Politica Economica, SIPI Spa, vol. 97(5), pages 245-258, September.
    • Handle: RePEc:rpo:ripoec:v:97:y:2007:i:5:p:245-258
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    References listed on IDEAS

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    1. Benassy, Jean-Pascal, 1998. "Is there always too little research in endogenous growth with expanding product variety?," European Economic Review, Elsevier, vol. 42(1), pages 61-69, January.
    2. Bucci, Alberto & Parello, Carmelo Pierpaolo, 2009. "Horizontal innovation-based growth and product market competition," Economic Modelling, Elsevier, vol. 26(1), pages 213-221, January.
    3. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    4. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
    5. Aghion, Philippe & Howitt, Peter, 2005. "Growth with Quality-Improving Innovations: An Integrated Framework," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 2, pages 67-110, Elsevier.
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    8. Alberto Bucci, 2005. "An Inverted-U Relationship between Product Market Competition and Growth in an Extended Romerian Model," Rivista di Politica Economica, SIPI Spa, vol. 95(5), pages 177-206, September.
    9. de Groot, Henri L. F. & Nahuis, Richard, 1998. "Taste for diversity and the optimality of economic growth," Economics Letters, Elsevier, vol. 58(3), pages 291-295, March.
    10. Dominique Bianco, 2006. "Competition and growth in endogenous growth model with expanding product variety without scale effects," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 49(3), pages 191-202.
    11. Gancia, Gino & Zilibotti, Fabrizio, 2005. "Horizontal Innovation in the Theory of Growth and Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 3, pages 111-170, Elsevier.
    12. Benassy, Jean-Pascal, 1991. "Monopolistic competition," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 37, pages 1997-2045, Elsevier.
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    Cited by:

    1. Dominique Bianco, 2009. "Growth And Competition In A Model Of Human Capital Accumulation And Research," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(3(9)_Fall).
    2. Alessandro D. SCOPELLITI, 2010. "Competition And Economic Growth: A Critical Survey Of The Theoretical Literature," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(1(11)_Spr), pages 70-93.
    3. Bianco, Dominique, 2007. "R&D, Competition and Growth with Human Capital Accumulation : A Comment," MPRA Paper 5243, University Library of Munich, Germany.
    4. Dominique BIANCO, 2009. "Competiton And Growth In An Endogenous Growth Model With Expanding Product Variety Without Scale Effects Revisited," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(4(10)_Win), pages 502-508.
    5. Wang, Vey & Lai, Chung-Hui, 2011. "Franchise fee, competition and economic growth," Economic Modelling, Elsevier, vol. 28(5), pages 2090-2099, September.

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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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