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An endogenous growth model with quality ladders and consumers’ heterogeneity

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  • Marasco, Antonio

Abstract

This paper develops an endogenous growth model with quality ladders where consumers heterogeneity is assumed and is modelled through non homothetic preferences. We show that in such a model, unlike mainstream quality ladders models, the steady state equilibrium is characterised by a duopoly were the state of the art technology and the one immediately below it are both able to survive and thrive, under given conditions for the income distribution. In the words of Schumpeter, this model delivers only partial creative destruction. Furthermore, we show that under duopoly, an increase in the degree of income inequality, raises the intensity of research activities and the growth rate of the economy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5389.

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Date of creation: Sep 2002
Date of revision: Jan 2007
Handle: RePEc:pra:mprapa:5389

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Keywords: Industrial Organization; Income Distribution; Technological Change; Innovation; Growth;

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  1. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1001-1026, October.
  2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: An Inverted-U Relationship," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 701-728, May.
  3. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
  4. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  5. Josef Zweimüller & Johann K. Brunner, 2005. "Innovation And Growth With Rich And Poor Consumers," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 233-262, 05.
  6. Chol-Won Li., . "Inequality and Growth: A Schumpeterian Perspective," Working Papers 9609, Business School - Economics, University of Glasgow, revised Feb 1998.
  7. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
  8. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  9. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  10. Mani, Anandi, 2001. " Income Distribution and the Demand Constraint," Journal of Economic Growth, Springer, vol. 6(2), pages 107-33, June.
  11. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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Cited by:
  1. Marasco, Antonio, 2005. "Testing Schumpeterian growth theory: the role of income inequality as a determinant of research and development expenditures (developed economies) and successful technology transfers (developing econo," MPRA Paper 4785, University Library of Munich, Germany.

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