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A Competitive Idea-Based Growth Model with Shrinking Workers' Income

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In this paper we present a model in which endogenous growth arises in competitive markets. Knowledge is described as a labor-augmenting factor used directly in the Önal goodsíproduction. Firms demand both basic non-rival knowledge contents, which are supplied jointly and inelastically with raw labor, and further contents supplied by patent holders. This fact, together with Lindahl prices for knowledge, allows competition to work, while it also implies that workersíincome share declines overtime. In a Örst version of the model with constant cost of knowledge production the Örst best is attained. In further versions of the model, in which the cost of knowledge production is allowed to change over time and externalities arise, in a decentralized economy a second best equilibrium occurs in the transitional period, while in the long run there is convergence to efficiency.

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  • Marchese, Carla & Privileggi, Fabio, 2014. "A Competitive Idea-Based Growth Model with Shrinking Workers' Income," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201415, University of Turin.
    • Handle: RePEc:uto:dipeco:201415
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    Cited by:

    1. Carla Marchese & Fabio Privileggi, 2018. "Endogenous economic growth with disembodied knowledge," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(3), pages 437-449, June.

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