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A dual economy model of endogenous growth with R&D and market structure

In: Schumpeterian Perspectives on Innovation, Competition and Growth

Author

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  • Thanh Le

    (University of Queensland)

Abstract

This paper develops a dual economy endogenous growth model to consider the effects of market structure and innovation on the rate of growth of an economy. There is an innovative goods sector where firms consistently invest in research and development to produce new products within a framework of monopolistic competition. Firms in the traditional goods sector produce a homogenous good, compete in a form of oligopoly (quantity competition), and seek to reduce their production costs. It is shown that growth is increasing in the market power that firms in the innovative goods sector obtain but decreasing in the equilibrium number of firms in the traditional goods sector.

Suggested Citation

  • Thanh Le, 2009. "A dual economy model of endogenous growth with R&D and market structure," Springer Books, in: Uwe Cantner & Jean-Luc Gaffard & Lionel Nesta (ed.), Schumpeterian Perspectives on Innovation, Competition and Growth, pages 97-114, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-93777-7_7
    DOI: 10.1007/978-3-540-93777-7_7
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    References listed on IDEAS

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    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
    2. Peretto, Pietro F., 1999. "Firm size, rivalry and the extent of the market in endogenous technological change," European Economic Review, Elsevier, vol. 43(9), pages 1747-1773, October.
    3. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107, Elsevier.
    4. 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.
    5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
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    7. Peretto, Pietro F, 1996. "Sunk Costs, Market Structure, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 895-923, November.
    8. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
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    11. Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, April.
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    13. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-293, June.
    14. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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    Cited by:

    1. Le, Thanh & Le Van, Cuong, 2018. "Research and development and sustainable growth over alternative types of natural resources," Economic Modelling, Elsevier, vol. 70(C), pages 215-229.

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    More about this item

    Keywords

    Market structure; R&D; Economic growth;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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