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Horizontal Innovation-Based Growth and Product Market Competition

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  • Alberto Bucci

    (Department of Economics, Business and Statistics, University of Milan)

  • Carmelo Parello

    (Catholic University of Louvain)

Abstract

The influence of the degree of competition in the goods market on growth is analyzed by developing an endogenous growth model with horizontal innovation. Product market competition is measured by (1- Lerner index) and depends on both the share of factor inputs in total income and on the elasticity of substitution across goods. We find that the shape of the relationship between competition and growth can change dramatically according to which proxy of competition is used. We interpret our results in terms of the interplay between the resource allocation and the profit incentive effects.

Suggested Citation

  • Alberto Bucci & Carmelo Parello, 2006. "Horizontal Innovation-Based Growth and Product Market Competition," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1032, Universitá degli Studi di Milano.
    • Handle: RePEc:bep:unimip:unimi-1032
    Note: oai:cdlib1:unimi-1032
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