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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
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  1. Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
  2. Michele Boldrin & David K Levine, 2006. "Perfectly Competitive Innovation," Levine's Working Paper Archive 618897000000000954, David K. Levine.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  4. Michele Boldrin, 2003. "Rent Seeking and Innovation," Theory workshop papers 658612000000000063, UCLA Department of Economics.
  5. 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.
  6. Edward Prescott & Ellen McGrattan, 2008. "Openness, Technology Capital, and Development," 2008 Meeting Papers 111, Society for Economic Dynamics.
  7. 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.
  8. Michele Boldrin & David K Levine, 2009. "A Model of Discovery," Levine's Working Paper Archive 814577000000000092, David K. Levine.
  9. 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.
  10. Jovanovic, Boyan & Lach, Saul, 1988. "Entry, Exit, And Diffusion With Learning By Doing," Working Papers 88-16, C.V. Starr Center for Applied Economics, New York University.
  11. Helios Herrera & Enrique Schroth, 2003. "Profitable Innovation Without Patent Protection: The Case of Derivatives," Working Papers 0302, Centro de Investigacion Economica, ITAM.
  12. Alvin K. Klevorick & Richard C. Levin & Richard R. Nelson & Sidney G. Winter, 1993. "On the Sources and Significance of Interindustry Differences in Technological Opportunities," Cowles Foundation Discussion Papers 1052, Cowles Foundation for Research in Economics, Yale University.
  13. Michele Boldrin & David K. Levine, 2000. "Growth cycles and market crashes," Staff Report 279, Federal Reserve Bank of Minneapolis.
  14. Boldrin,Michele & Levine,David K., 2010. "Against Intellectual Monopoly," Cambridge Books, Cambridge University Press, number 9780521127264.
  15. Michele Boldrin & David K Levine, 2001. "Factor Saving Innovation," Levine's Working Paper Archive 625018000000000088, David K. Levine.
  16. Funk, Peter, 2008. "Entry and growth in a perfectly competitive vintage model," Journal of Economic Theory, Elsevier, vol. 138(1), pages 211-236, January.
  17. 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.
  18. 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.
  19. 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.
  20. Josh Lerner, 2002. "Patent Protection and Innovation Over 150 Years," NBER Working Papers 8977, National Bureau of Economic Research, Inc.
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