Competing process and quality innovation in a model of occupational choice
AbstractWe develop a simple model of endogenous growth and occupational choice in which skill differentiated workers choose between three types of employment activity: production, process innovation,and quality innovation. Incumbent firms invest in process innovation to reduce production costs and market entrants invest in quality improvements in order to capture the market from vintage product lines. We use this framework to examine innovation incentives for incumbent firms in an environment of creative destruction and find that there are two plausible and stable patterns of product evolution: a corner equilibrium with quality growth alone, and an interior equilibrium with both productivity growth and quality growth. We also show that the process innovation of an interior equilibrium has important policy implications for economic growth.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 0915.
Date of creation: Nov 2009
Date of revision:
Process innovation; Quality innovation; Endogenous growth; Occupational choice;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-27 (All new papers)
- NEP-CSE-2009-11-27 (Economics of Strategic Management)
- NEP-ENT-2009-11-27 (Entrepreneurship)
- NEP-INO-2009-11-27 (Innovation)
- NEP-KNM-2009-11-27 (Knowledge Management & Knowledge Economy)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gene M. Grossman & Elhanan Helpman, 1991.
"Quality Ladders in the Theory of Growth,"
NBER Working Papers
3099, National Bureau of Economic Research, Inc.
- Pietro Peretto & Sjak Smulders, 2002.
"Technological Distance, Growth And Scale Effects,"
Royal Economic Society, vol. 112(481), pages 603-624, July.
- Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
- Peretto, Pietro F., 1995.
"Sunk Costs, Market Structure, and Growth,"
95-34, Duke University, Department of Economics.
- Laura Bottazzi & Giovanni Peri, .
"Innovation and Spillovers in Regions: Evidence from European Patent Data,"
215, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Bottazzi, Laura & Peri, Giovanni, 2003. "Innovation and spillovers in regions: Evidence from European patent data," European Economic Review, Elsevier, vol. 47(4), pages 687-710, August.
- Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kimiaki Shirahama).
If references are entirely missing, you can add them using this form.