Endogenous Prduct Cycles
AbstractWe construct a model of the product cycle featuring endogenous innovation and endogenous technology transfer. Competitive entrepreneurs in the North expend resources to bring out new products whenever expected present discounted value of future oligopoly profits exceeds current product development costs. Each Northern oligopolist continuously faces the risk that its product will be copied by a Southern imitator, at which time its profit stream will come to an end. In the South, competitive entrepreneurs may devote resources to learning the production processes that have been developed in the North. There too, costs (of reverse engineering) must be covered by a stream of operating profits. We study the determinants of the long-run rate of growth of the world economy, and the long-run rate of technological diffusion. We also provide an analysis of the effects of exogenous events and of public policy on relative wage rates in the two regions.
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Bibliographic InfoPaper provided by Princeton, Woodrow Wilson School - Public and International Affairs in its series Papers with number 144.
Length: 33 pages
Date of creation: 1989
Date of revision:
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technological change ; innovations ; economic growth ; trade;
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- Grossman, Gene M. & Helpman, Elhanan, 1989.
"Product Development and International Trade,"
3445094, Harvard University Department of Economics.
- Grossman, G.M. & Helpman, E., 1988. "Product Development And International Trade," Papers 132, Princeton, Woodrow Wilson School - Public and International Affairs.
- Gene M. Grossman & Elhanan Helpman, 1990. "Product Development and International Trade," NBER Working Papers 2540, National Bureau of Economic Research, Inc.
- Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-66, April.
- Paul Romer, 1991.
"Endogenous Technological Change,"
NBER Working Papers
3210, National Bureau of Economic Research, Inc.
- 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.
- Jensen, Richard & Thursby, Marie, 1986. "A strategic approach to the product life cycle," Journal of International Economics, Elsevier, vol. 21(3-4), pages 269-284, November.
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