Advanced Search
MyIDEAS: Login

Variety, Spillovers and Market Structure in aModel of Endogenous Technological Change

Contents:

Author Info

  • Peretto, Pietro

Abstract

I study an economy where oligopolistic firms establish in-house R&D programs to produce a continuous flow of cost-reducing (incremental) innovations. The scale of firms' R&D operations determines the rate of productivity growth. I first study the role of concentration, firm size, and demand, appropriability, and opportunity conditions, when the number of firms is exogenous. I find hump-shaped relationships of knowledge appropriability and the number of firms with steady-state growth that give a first intuition about the forces at work in the model. In symmetric equilibrium, static economies of scale due to variety of input supply and knowledge spillovers yield increasing returns to the number of firms. A larger number of firms leads to higher output, higher (aggregate) R&D, and faster growth. Offsetting this force, market fragmentation leads to smaller firms, smaller R&D programs, and slower growth. Next, I let the number of firms be endogenous and study the balanced-growth path of the economy in two dimensions: productivity growth and the number (variety) of goods. The price, investment, entry, and exit decisions are interdependent. In particular, R&D is a fixed (sunk) cost and in zero-profit equilibrium is negatively related to the number of firms. This additional feed-back reinforces the market fragmentation effect. More importantly, many parameters have no longer the effects predicted by the model with an exogenous number of firms (and the standard models in the literature). For example, the scale effect of population size may be negative. Large markets have many firms, high output, and high aggregate R&D. Market fragmentation may offset this force and result in small firms and slower growth.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Duke University, Department of Economics in its series Working Papers with number 95-06.

as in new window
Length:
Date of creation: 1995
Date of revision:
Publication status: Published in INCREASING RETURNS AND ECONOMIC ANALYSIS, K. Arrow, K. Ng and X. Yang, eds. (New York: St. Martin's Press, 1998), pages 338-366.
Handle: RePEc:duk:dukeec:95-06

Contact details of provider:
Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
Phone: (919) 660-1800
Fax: (919) 684-8974
Web page: http://econ.duke.edu/

Related research

Keywords:

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:95-06. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics Webmaster).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.