Quality Competition, Market Structure and Endogenous Growth
This paper studies the role of quality competition in endogenous growth and institutional factors which can affect growth through affecting quality competition. The R&D-based growth literature as it stands attributes the incentives for innovations to monopolist market structure, and regards the driving force of growth being 'the rent-pull'. This paper presents a 'competition-push' theory of growth by considering an environment where firms can coexist and compete in quality within the same markets. Quality competition takes the form of vertical product differentiation or cost-reducing process innovation, which requires endogenous fixed R&D costs. Due to the nonrival and excludable features of 'quality' and consequent nonconvexity, market concentration naturally occurs in a manner such that R&D intensity and market structure are determined simultaneously in equilibrium. The main conclusions are that quality competition suffices to provide incentives for innovation at industry level, and through knowledge spillovers it also drives aggregate technical progress, that institutional restriction on free entry into quality competition may be desirable to some degree, but monopolization is usually not optimal, that credit constraint which limits quality competition is detrimental to growth.
|Date of creation:||Sep 1999|
|Contact details of provider:|| Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp|
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.:
- Raghuram G. Rajan & Luigi Zingales, "undated".
"Financial Dependence and Growth,"
CRSP working papers
344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Paul Romer, 1989.
"Endogenous Technological Change,"
NBER Working Papers
3210, National Bureau of Economic Research, Inc.
- Robert G. King & Ross Levine, 1993.
"Finance and Growth: Schumpeter Might Be Right,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 108(3), pages 717-737.
- Hellwig, Martin & Irmen, Andreas, 1999.
"Endogenous technical change in a competitive economy,"
99-53, Sonderforschungsbreich 504.
- Hellwig, Martin & Irmen, Andreas, 2001. "Endogenous Technical Change in a Competitive Economy," Journal of Economic Theory, Elsevier, vol. 101(1), pages 1-39, November.
- Hellwig, Martin & Irmen, Andreas, 1999. "Endogenous Technical Change in a Competitive Economy," Sonderforschungsbereich 504 Publications 99-53, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
- Gene M. Grossman & Elhanan Helpman, 1991.
"Quality Ladders in the Theory of Growth,"
Review of Economic Studies,
Oxford University Press, vol. 58(1), pages 43-61.
- Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
- Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
- Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated".
"What Determines Firm Size?,"
CRSP working papers
496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, 1999. "What Determines Firm Size?," NBER Working Papers 7208, National Bureau of Economic Research, Inc.
- Kumar, Krishna B & Rajan, Raghuram G & Zingales, Luigi, 1999. "What Determines Firm Size?," CEPR Discussion Papers 2211, C.E.P.R. Discussion Papers.
- Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-293, June.
- Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
When requesting a correction, please mention this item's handle: RePEc:cep:stieip:25. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.