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Quality Ladders And Product Cycles

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Author Info

  • GROSSMAN, G.M.
  • HELPMAN, E.

Abstract

We develop a two-country model of endogenous innovation and imitation in order to study the interactions between these two processes. Firms in the North race to bring out the next generation of a set of technology-intensive products. Each product potentially can be improved a countably infinite number of times, but quality improvements require the investment of resources and entail uncertain prospects of success. In the South, entrepreneurs invest resources in order to learn the production processes that have been developed in the North. All R&D investment decisions are made by forward looking, profit maximizing entrepreneurs. The steady-state equilibrium is characterized by constant aggregate rates of innovation and imitation. We study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning.

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Bibliographic Info

Paper provided by Princeton, Woodrow Wilson School - Public and International Affairs in its series Papers with number 152.

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Length: 29 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:fth:priwpu:152

Contact details of provider:
Postal: PRINCETON UNIVERSITY, WOODROW WILSON SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, PRINCETON NEW- JERSEY 08542 U.S.A.
Phone: (609) 258-4800
Web page: http://www.wws.princeton.edu/
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Related research

Keywords: innovations ; enterprises ; research and development ; investment policy;

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References

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  1. Gene M. Grossman & Elhanan Helpman, 1989. "Endogenous Product Cycles," NBER Working Papers 2913, National Bureau of Economic Research, Inc.
  2. 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.
  3. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  4. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  5. Nancy L. Stokey, 1989. "The Volume and Composition of Trade Between Rich and Poor Countries," Discussion Papers 849, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  7. 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.
  8. 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.
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