Competition in an Increasing Variety Growth Model
AbstractThis paper introduces competitive markets in the Grossman- Helpman [1991, ch. 3] increasing variety growth model. In this standard model of endogenous growth theory, competition has a negative incentive effect. Accordingly, a larger resource base is required to sustain long run growth. In an intermediate range, however, there is path dependence. In this case, too much initial competition may ultimately stall the growth process. Moreover, by introducing asymmetry in market-power, competition gives rise to static welfare losses. In economies with a small positive growth rate, welfare losses due to varying mark-up factors may be large enough to offset the benefits of growth.
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Bibliographic InfoPaper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 001.
Length: 43 pages
Date of creation: Sep 2006
Date of revision:
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