A Model of Growth Through Creative Destruction
Philippe Aghion,Peter Howitt +1 more
TL;DR: In this paper, a model of endogenous growth is developed in which vertical innovations, generated by a competitive research sector, constitute the underlying source of growth and equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends upon the expected amount of the research next period.
read more
Abstract: A model of endogenous growth is developed in which vertical innovations, generated by a competitive research sector, constitute the underlying source of growth. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends upon the expected amount of research next period. One source of this intertemporal relationship is creative destruction. That is, the prospect of more future research discourages current research by threatening to destroy the rents created by current research. The paper analyzes the positive and normative properties of stationary equilibria, in which research employment is constant and GNP follows a random walk with drift, although under some circumstances cyclical equilibria also exist. Both the average growth rate and the variance of the growth rate are increasing functions of the size of innovations, the size of the skilled labor force, and the productivity of research as measured by a parameter indicating the effect of research on the Poisson arrival rate of innovations; and decreasing functions of the rate of time preference of the representative individual. Under laissez faire the economy's growth rate may be more or less than optimal because, in addition to the appropriability and intertemporal spillover effects of other endogenous growth models, which tend to make growth slower than optimal, the model also has effects that work in the opposite direction. In particular, the fact that private research firms do not internalize the destruction of rents generated by their innovations introduces a business-stealing effect similar to that found in the partial-equilibrium patent race literature. When we endogenize the size of innovations we find that business stealing also makes innovations too small.
read more
Chat with Paper
AI Agents for this Paper
Find similar papers on Google Scholar, PubMed and Arxiv
Write a critical review of this paper
Analyze citations of this paper to find unaddressed research gaps
Citations
Identifying Technology Spillovers and Product Market Rivalry
TL;DR: The authors developed a general framework showing that technology and product market spillovers have testable implications for a range of performance indicators, and exploited these using distinct measures of a firm's position in the technology space and the product market space.
Patterns of skill premia
TL;DR: In this paper, the authors developed a model to analyse how skill premia differ over time and across countries, and used this model to study the impact of international trade on wage inequality.
Do financing constraints matter for R&D?
TL;DR: In this article, a large sample of European firms and also find little evidence of binding finance constraints when they estimate standard investment-cash flow regressions, however, they find strong evidence that the availability of finance matters for R&D once they directly control for firm efforts to smooth R&Ds with cash reserves and firm use of external equity finance.
654
The impacts of environmental regulations on competitiveness
TL;DR: In this article, the authors review the empirical literature on the impacts of environmental regulations on firms' competitiveness as measured by trade, industry location, employment, productivity, and in-state productivity.
The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital
Charles I. Jones,Paul M. Romer +1 more
TL;DR: In contrast to Kaldor's facts, which revolved around a single state variable, physical capital, our updated facts force consideration of four far more interesting variables: ideas, institutions, population, and human capital as discussed by the authors.
References
Increasing Returns and Long-Run Growth
TL;DR: In this paper, the authors present a fully specified model of long-run growth in which knowledge is assumed to be an input in production that has increasing marginal productivity, which is essentially a competitive equilibrium model with endogenous technological change.
On the mechanics of economic development
TL;DR: In this article, the authors consider the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development, and compare three models and compared to evidence.
21.5K
•Book
The Theory of Industrial Organization
Jean Tirole
- 01 Jan 1988
TL;DR: The Theory of Industrial Organization as discussed by the authors is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas.
Large Shareholders and Corporate Control
Andrei Shleifer,Robert W. Vishny +1 more
TL;DR: In this article, the authors explore a model in which the presence of a large minority shareholder provides a partial solution to the free-rider problem in a corporation with many small owners, where the corporation may not pay any one of them to monitor the performance of the management.
9.3K
Monopolistic competition and optimum product diversity
Avinash Dixit,Joseph E. Stiglitz +1 more
TL;DR: In this article, Pettengill tests whether there is an excessive number of firms in a monopolistically competitive equilibrium by a device of considerable expository merit, and redistributes the resources thus released equally over the remaining firms in the sector, to see if welfare can be improved.