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Competition in an Increasing Variety Growth Model

Author

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  • Christian Bauer

    () (Department of Economics, University of Regensburg)

Abstract

This paper introduces competitive markets in the Grossman- Helpman [1991, ch. 3] increasing variety growth model. In this standard model of endogenous growth theory, competition has a negative incentive effect. Accordingly, a larger resource base is required to sustain long run growth. In an intermediate range, however, there is path dependence. In this case, too much initial competition may ultimately stall the growth process. Moreover, by introducing asymmetry in market-power, competition gives rise to static welfare losses. In economies with a small positive growth rate, welfare losses due to varying mark-up factors may be large enough to offset the benefits of growth.

Suggested Citation

  • Christian Bauer, 2006. "Competition in an Increasing Variety Growth Model," Working Papers 001, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:001_bauer
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    File URL: http://www.bgpe.de/texte/DP/001_bauer.pdf
    File Function: First version, 2007
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    References listed on IDEAS

    as
    1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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