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Growth leaders

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  • Etro, Federico

Abstract

This article presents a Schumpeterian model where the engine of growth is in the microeconomic structure of the patent races. Under decreasing marginal productivity and endogenous entry in the R&D sector, the equilibrium is characterized by small firms investing too little and the growth process is dynamically inefficient; the optimal policy for innovation always implies R&D subsidies. When the incumbent monopolists are leaders in patent races with endogenous entry, they engage in larger R&D investment and their persistent leadership enhances growth. In a multicountry setup, growth is driven by innovations in the largest country and increases with its relative size and openness. Finally, I derive the optimal R&D subsidy from the point of view of a single country, and provide a new case for international coordination of R&D policies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 3 (September)
Pages: 1148-1172

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:3:p:1148-1172

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Web page: http://www.elsevier.com/locate/inca/622617

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References

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  1. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  2. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  3. Etro, Federico & Ageloni, Ignazio & Alesina, Alberto, 2005. "International Unions," Scholarly Articles 4553008, Harvard University Department of Economics.
  4. Richard Blundell & Rachel Griffith & Frank Windmeijer, 1999. "Individual effects and dynamics in count data models," IFS Working Papers W99/03, Institute for Fiscal Studies.
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  9. Segerstrom, Paul S., 1999. "Intel Economics," Working Paper Series 524, Research Institute of Industrial Economics.
    • Paul S. Segerstrom, 2007. "Intel Economics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 247-280, 02.
  10. Czarnitzki, Dirk & Kraft, Kornelius, 2005. "License Expenditures of Incumbents and Potential Entrants: An Empirical Analysis of Firm Behavior," ZEW Discussion Papers 05-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Kresimir Zigic & Viatcheslav Vinogradov & Eugen Kovac, 2006. "Persistence of Monopoly, Innovation, and R-and-D Spillovers: Static versus Dynamic Analysis," Computing in Economics and Finance 2006 516, Society for Computational Economics.
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  13. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
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  15. Minniti, Antonio, 2006. "Multi-Product Firms, R&D, and Growth," MPRA Paper 2097, University Library of Munich, Germany.
  16. Federico Etro, 2007. "Stackelberg competition with endogenous entry," Working Papers 121, University of Milano-Bicocca, Department of Economics, revised 2007.
  17. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
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  19. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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Citations

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Cited by:
  1. Federico Etro & Andrea Colciago, 2010. "Endogenous Market Structures and the Business Cycle," Economic Journal, Royal Economic Society, vol. 120(549), pages 1201-1233, December.
  2. Colciago, Andrea & Etro, Federico, 2010. "Real business cycles with Cournot competition and endogenous entry," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1101-1117, December.
  3. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
  4. Pedro Gil & Fernanda Figueiredo, 2013. "Firm size distribution under horizontal and vertical innovation," Journal of Evolutionary Economics, Springer, vol. 23(1), pages 129-161, January.

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