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Innovation Races, Strategic Externalities and Endogenous Growth

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  • Louis Corriveau

Abstract

I expound a tractable model of an infinite‐horizon multi‐sector economy where endogenous growth in the aggregate results from innovation races which go on in each and every sector. I identify five externalities that have strategic implications: the ‘contemporaneous real income’, the ‘lagged real income’, the ‘aggregate demand’, the ‘Shleifer’ and the ‘competition’ effects. I prove that multiple stationary equilibria can exist and lead to different rates of growth, and show that, in any stationary equilibrium, the rate of growth is constant. Finally, I prove that the rate of growth may be higher or lower than social welfare warrants.

Suggested Citation

  • Louis Corriveau, 1998. "Innovation Races, Strategic Externalities and Endogenous Growth," Economica, London School of Economics and Political Science, vol. 65(259), pages 303-325, August.
    • Handle: RePEc:bla:econom:v:65:y:1998:i:259:p:303-325
    DOI: 10.1111/1468-0335.00131
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