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Competing Engines of Growth: Innovation and Standardization

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  • Daron Acemoglu
  • Gino Gancia
  • Fabrizio Zilibotti

Abstract

We study a dynamic general equilibrium model where innovation takes the form of the introduction of new goods whose production requires skilled workers. Innovation is followed by a costly process of standardization, whereby these new goods are adapted to be produced using unskilled labor. Our framework highlights a number of novel results. First, standardization is both an engine of growth and a potential barrier to it. As a result, growth is an inverse U-shaped function of the standardization rate (and of competition). Second, we characterize the growth and welfare maximizing speed of standardization. We show how optimal protection of intellectual property rights affecting the cost of standardization vary with the skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that, depending on how competition between innovating and standardizing firms is modelled and on parameter values, a new type of multiplicity of equilibria may arise. Finally, we study the implications of our model for the skill premium and we illustrate novel reasons for linking North–South trade to intellectual property rights protection.

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Bibliographic Info

Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000243.

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Date of creation: 08 Oct 2010
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Handle: RePEc:cla:levarc:661465000000000243

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  1. Galor, O. & Tsiddon, D., 1996. "Technological Progress, Mobility and Economic Growth," Papers 13-96, Tel Aviv.
  2. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  3. Gene M. Grossman & Edwin L.-C. Lai, 2004. "International Protection of Intellectual Property," American Economic Review, American Economic Association, vol. 94(5), pages 1635-1653, December.
  4. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
  5. Dinopoulos, Elias & Segerstrom, Paul, 2006. "North-South Trade and Economic Growth," CEPR Discussion Papers 5887, C.E.P.R. Discussion Papers.
  6. Boyan Jovanovic & Yaw Nyarko, 1994. "Learning By Doing and the Choice of Technology," NBER Working Papers 4739, National Bureau of Economic Research, Inc.
  7. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  8. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 469-497, May.
  9. Gino Gancia & Fabrizio Zilibotti, 2008. "Technological change and the wealth of nations," Economics Working Papers 1125, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Gancia, Gino & Bonfiglioli, Alessandra, 2008. "North-South trade and directed technical change," Journal of International Economics, Elsevier, vol. 76(2), pages 276-295, December.
  11. Dinopoulos, Elias & Segerstrom, Paul, 2010. "Intellectual property rights, multinational firms and economic growth," Journal of Development Economics, Elsevier, vol. 92(1), pages 13-27, May.
  12. David N. Weil, 1996. "Appropriate Technology and Growth," Working Papers 96-24, Brown University, Department of Economics.
  13. Michele Boldrin & David K Levine, 2005. "IP and Market Size," Levine's Working Paper Archive 618897000000000836, David K. Levine.
  14. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, vol. 55(1), pages 133-153, February.
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Cited by:
  1. Michael Koenig & Jan Lorenz & Fabrizio Zilibotti, . "Innovation vs. Imitation and the Evolution of Productivity Distributions," Discussion Papers 11-008, Stanford Institute for Economic Policy Research.
  2. Alessandra Bonfiglioli & Gino Gancia, 2009. "Growth, selection and appropriate contracts," Economics Working Papers 1345, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2012.
  3. Daria Onori, 2013. "Competition and Growth: Reinterpreting their Relationship," Working Papers halshs-00806994, HAL.
  4. Gino Gancia & Andreas Müller & Fabrizio Zilibotti, 2010. "Structural Development Accounting," Working Papers 494, Barcelona Graduate School of Economics.
  5. Ömer Özak, 2012. "Distance to the Technological Frontier and Economic Development," Departmental Working Papers 1201, Southern Methodist University, Department of Economics.
  6. Michael Wycherley, 2010. "Innovation versus Imitation: Intellectual Property Rights in a North-South Framework," DEGIT Conference Papers c015_011, DEGIT, Dynamics, Economic Growth, and International Trade.
  7. Umberto Garfagnini & Bruno Strulovici, 2012. "Social Learning and Innovation Cycles (revision of DP#1516, The Dynamics of Innovation)," Discussion Papers 1546, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Christopher Spencer & Paul Temple, 2012. "Alternative Paths of Learning: Standardisation and Growth in Britain, 1901-2009," Discussion Paper Series 2012_10, Department of Economics, Loughborough University, revised Oct 2012.
  9. Michael Wycherley, 2011. "Innovation versus Imitation: Intellectual Property Rights in a North-South Framework," Trinity Economics Papers tep2011, Trinity College Dublin, Department of Economics.

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