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Generalized barriers to entry and economic development

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  • Pier Saviotti
  • Andreas Pyka

Abstract

In this paper we are going to analyze the dynamics of barriers to entry at the international level. In our model economic development takes place and continues in the long run due to the emergence of new sectors, which can compensate for the diminishing ability of mature sectors to create employment and growth. Each new sector is created by a pervasive innovation, which creates a new market and into and out of which there are entry and exit of firms. Depending on the inter-temporal coordination of the maturation of older sectors and of the maturation of new ones our model can give rise to development paths with growth rates ranging from high to negative, to fluctuations, to bubbles and to chaos. In the construction of our model we found inspiration in a number of growth models, both endogenous and evolutionary as well as on empirical work on structural change. The model also bears some similarity of style to history friendly models. Its unique feature is that it gives rise to an endogenously variable number of sectors. Unless new sectors are exact substitutes of older ones the model gives rise to growing variety. In fact, the main objective for which the model was initially constructed was to test some propositions implying that variety growth is a necessary requirement for long term economic development. Within our model the ability to create new sectors at the right times is the crucial determinant of the growth potential of an economic system. Thus, inter country differences in the barriers to entry into new sectors can be expected to give rise to different rates of growth and in the end to increasingly skewed world income distribution.
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Suggested Citation

  • Pier Saviotti & Andreas Pyka, 2011. "Generalized barriers to entry and economic development," Journal of Evolutionary Economics, Springer, vol. 21(1), pages 29-52, February.
  • Handle: RePEc:spr:joevec:v:21:y:2011:i:1:p:29-52
    DOI: 10.1007/s00191-010-0184-2
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    3. -, 2014. "Latin American Economic Outlook 2015: Education, skills and innovation for development," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37446 edited by Ocde.

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    More about this item

    Keywords

    Entry barriers; Catching-up; Economic growth and development; O10; O54; E11;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian

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