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An Inverted-U Relationship between Product Market Competition and Growth in an Extended Romerian Model

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  • Alberto Bucci

    ()
    (Università di Milano)

Abstract

The influence of product market competition on growth is re-considered by developing an extension of the basic Romerian model of horizontal innovation. We find that the relationship between competition and growth is inverse-U shaped, provided that the non-accumulable factor input is employed in each sector. We explain this result by the interplay between two effects. For low values of competition, the positive resource allocation effect outweighs the negative profit incentive effect. When product market competition is intense, the resource allocation and profit incentive effects are both negative and reinforce each other in inducing a negative correlation between competition and growth.

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Article provided by SIPI Spa in its journal Rivista di Politica Economica.

Volume (Year): 95 (2005)
Issue (Month): 5 (September-October)
Pages: 177-206

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Handle: RePEc:rpo:ripoec:v:95:y:2005:i:5:p:177-206

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Citations

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Cited by:
  1. Daria Onori, 2011. "Welfare, Competition, Specialization and Growth," Working Papers halshs-00580722, HAL.
  2. Bianco, Dominique, 2008. "Growth and Competition in a Model of Human Capital Accumulation and Research," MPRA Paper 10913, University Library of Munich, Germany.
  3. Wang, Vey & Lai, Chung-Hui, 2011. "Franchise fee, competition and economic growth," Economic Modelling, Elsevier, vol. 28(5), pages 2090-2099, September.
  4. Alessandro D. SCOPELLITI, 2010. "Competition And Economic Growth: A Critical Survey Of The Theoretical Literature," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(1(11)_Spr), pages 70-93.
  5. Alberto BUCCI, 2004. "Economic growth in an enlarged Europe: the human capital and R&D dimensions," Departmental Working Papers 2004-22, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

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