Endogenous Product Cycles
We construct a model of the product cycle featuring endogenous innovation and endogenous technology transfer. Competitive entrepreneurs in the North expend resources to bring out new products whenever expected present discounted value of future oligopoly profits exceeds current product development costs. Each Northern oligopolist continuously faces the risk that its product will be copied by a Southern imitator, at which time its profit stream will come to an end. In the South, competitive entrepreneurs may devote resources to learning the production processes that have been developed in the North. There too, costs (of reverse engineering) must be covered by a stream of operating profits. We study the determinants of the long-run rate of growth of the world economy, and the long-run rate of technological diffusion. We also provide an analysis of the effects of exogenous events and of public policy on relative wage rates in the two regions.
|Date of creation:||Mar 1989|
|Date of revision:|
|Publication status:||published as Economic Journal, Vol. 101, No. 408, September 1991.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Helpman, Elhanan & Grossman, Gene M., 1989.
"Product Development and International Trade,"
3445094, Harvard University Department of Economics.
- Gene M. Grossman & Elhanan Helpman, 1988. "Product Development and International Trade," NBER Working Papers 2540, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1988. "Product Development And International Trade," Papers 132, Princeton, Woodrow Wilson School - Public and International Affairs.
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"Endogenous Technological Change,"
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- Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
- Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
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