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Technological Distance, Growth And Scale Effects

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  • Pietro Peretto

    (Duke University)

  • Sjak Smulders

    (Tilburg University)

Abstract

We present an endogenous growth model in which the scale effect may be positive or negative, but vanishes asymptotically. The mechanism behind this result provides a microfoundation for models that exploit the interaction of growth and market structure to remove the scale effect. When more firms are active, the economy is more specialised in that firms are less likely to work on related problems. This increase in technological distance reduces the spillovers between firms. A larger economy with more firms accumulates more knowledge. However, the spillovers that benefit a firm do not necessarily increase because of the differentiation of the knowledge stock. Copyright 2002 Royal Economic Society

Suggested Citation

  • Pietro Peretto & Sjak Smulders, 2002. "Technological Distance, Growth And Scale Effects," Economic Journal, Royal Economic Society, vol. 112(481), pages 603-624, July.
  • Handle: RePEc:ecj:econjl:v:112:y:2002:i:481:p:603-624
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    References listed on IDEAS

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