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An endogenous growth model with quality ladders and consumers’ heterogeneity

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  • Marasco, Antonio

Abstract

This paper develops an endogenous growth model with quality ladders where consumers heterogeneity is assumed and is modelled through non homothetic preferences. We show that in such a model, unlike mainstream quality ladders models, the steady state equilibrium is characterised by a duopoly were the state of the art technology and the one immediately below it are both able to survive and thrive, under given conditions for the income distribution. In the words of Schumpeter, this model delivers only partial creative destruction. Furthermore, we show that under duopoly, an increase in the degree of income inequality, raises the intensity of research activities and the growth rate of the economy.

Suggested Citation

  • Marasco, Antonio, 2002. "An endogenous growth model with quality ladders and consumers’ heterogeneity," MPRA Paper 5389, University Library of Munich, Germany, revised Jan 2007.
    • Handle: RePEc:pra:mprapa:5389
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    References listed on IDEAS

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    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    2. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    4. Mani, Anandi, 2001. "Income Distribution and the Demand Constraint," Journal of Economic Growth, Springer, vol. 6(2), pages 107-133, June.
    5. Josef Zweimüller & Johann K. Brunner, 2005. "Innovation And Growth With Rich And Poor Consumers," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 233-262, May.
    6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    7. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
    8. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    9. Chol-Won Li., "undated". "Inequality and Growth: A Schumpeterian Perspective," Working Papers 9609, Business School - Economics, University of Glasgow, revised Feb 1998.
    10. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
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    Cited by:

    1. Marasco, Antonio, 2005. "Testing Schumpeterian growth theory: the role of income inequality as a determinant of research and development expenditures (developed economies) and successful technology transfers (developing economies)," MPRA Paper 4785, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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