Innovation by Leaders II: Schumpeterian Growth with Endogenous Persistence of Leadership

Name: Innovation by Leaders II: Schumpeterian Growth with Endogenous Persistence of Leadership
Brand: Vita e Pensiero
Price: 6.00 EUR
Availability: OnlineOnly

digital

Article

Magazine

RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI

Issue

RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2007 - 1

Title

Innovation by Leaders II: Schumpeterian Growth with Endogenous Persistence of Leadership

Author

Federico Etro

Publisher

Vita e Pensiero

Format

Article |

Pdf

Pages

Online from

01-2007

Issn

0035-676X (print) | 1827-7918 (digital)

€ 6.00

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Description

I develop a Schumpeterian model of endogenous growth with realistic features of the market for innovations as decreasing marginal productivity at the firm level and the possibility of wasteful duplications of resources between firms due to congestion at the industry level. Moreover, I consider the possibility that incumbent patentholders have a competitive advantage in the patent races for the next generation technologies and hence endogenously invest in R&D: in this case the value of being a leader is higher and growth driven by market leaders is higher. Technically the paper provides a complete analytical solution of the general equilibrium model with endogenous persistence of leadership through dynamic programming techniques and undetermined coefficient methods. Moreover, this framework can be used for other macroeconomic investigations: I show that other sources of growth may reduce investment inducing a paradoxical negative correlation between growth and R&D spending, and that price stickiness induces an inverted U relation between inflation and long run growth.