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Quality Ladders, Competition and Endogenous Growth

  • Michele Boldrin
  • David K Levine

We examine a competitive theory in which new ideas are introduced only when diminishing returns to the use of existing ideas sets in. After an idea is introduced, the capital associated with that idea expands, and the price of the idea falls. Once the price falls far enough, it becomes profitable to introduce a new, costlier, idea. The resulting competitive theory is consistent with fixed costs of innovation, no more difficult than the existing theory of monopolistic innovation, and accounts for the same basic facts. However, there is evidence that innovation is driven by diminishing returns on existing ideas – a fact that the existing theory does not account for.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000028.

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Date of creation: 23 Mar 2010
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Handle: RePEc:cla:levarc:661465000000000028
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
  2. Boldrin, Michele & Levine, David K., 2008. "Perfectly competitive innovation," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 435-453, April.
  3. Nancy L. Rose & Paul L. Joskow, 1988. "The Diffusion of New Technologies: Evidence From the Electric Utility Industry," NBER Working Papers 2676, National Bureau of Economic Research, Inc.
  4. Michele Boldrin & David K. Levine, 1999. "Growth Cycles and Market Crashes," Levine's Working Paper Archive 2028, David K. Levine.
  5. David Andolfatto & Glenn M. MacDonald, 1998. "Technology Diffusion and Aggregate Dynamics," Cahiers de recherche CREFE / CREFE Working Papers 58, CREFE, Université du Québec à Montréal.
  6. Boldrin, Michele & Levine, David K., 2002. "Factor Saving Innovation," Journal of Economic Theory, Elsevier, vol. 105(1), pages 18-41, July.
  7. Josh Lerner, 2002. "Patent Protection and Innovation Over 150 Years," NBER Working Papers 8977, National Bureau of Economic Research, Inc.
  8. Michele Boldrin & David K Levine, 2003. "Rent Seeking and Innovation," Levine's Working Paper Archive 618897000000000465, David K. Levine.
  9. Edward Prescott & Ellen McGrattan, 2008. "Openness, Technology Capital, and Development," 2008 Meeting Papers 111, Society for Economic Dynamics.
  10. Klevorick, Alvin K. & Levin, Richard C. & Nelson, Richard R. & Winter, Sidney G., 1995. "On the sources and significance of interindustry differences in technological opportunities," Research Policy, Elsevier, vol. 24(2), pages 185-205, March.
  11. Michele Boldrin & David K. Levine, 2009. "A Model of Discovery," American Economic Review, American Economic Association, vol. 99(2), pages 337-42, May.
  12. Funk, Peter, 2008. "Entry and growth in a perfectly competitive vintage model," Journal of Economic Theory, Elsevier, vol. 138(1), pages 211-236, January.
  13. repec:fth:simfra:95-08 is not listed on IDEAS
  14. repec:fth:waterl:9503 is not listed on IDEAS
  15. Helios Herrera & Enrique Schroth, 2003. "Profitable Innovation Without Patent Protection: The Case of Derivatives," Working Papers 0302, Centro de Investigacion Economica, ITAM.
  16. Serguey Braguinsky & Salavat Gabdrakhmanov & Atsushi Ohyama, 2007. "A Theory of Competitive Industry Dynamics With Innovation and Imitation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 729-760, October.
  17. Jovanovic, Boyan & Lach, Saul, 1989. "Entry, Exit, and Diffusion with Learning by Doing," American Economic Review, American Economic Association, vol. 79(4), pages 690-99, September.
  18. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
  19. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
  20. Hannan, Timothy H & McDowell, John M, 1987. "Rival Precedence and the Dynamics of Technology Adoption: An Empirical Analysis," Economica, London School of Economics and Political Science, vol. 54(214), pages 155-71, May.
  21. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
  22. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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