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
Environmental implications of economic complexity and its role in determining how renewable energies affect CO2 emissions
TL;DR: In this article, the authors investigated the relationship between the economic complexity index and CO2 emissions and found that increasing the intensity of energy use, trade openness, and urbanization all increase emissions, although the effects of urbanization eventually became insignificant.
188
Antitrust in Innovative Industries
Ilya Segal,Michael D. Whinston +1 more
TL;DR: In this paper, the authors study the effects of antitrust policy in industries with continual innovation and show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply, holding the innovation rate fixed.
Chapter 41 Gross job flows
Steven J. Davis,John Haltiwanger +1 more
TL;DR: In this paper, the authors synthesize the growing body of research on this process, especially as it pertains to the creation and destruction of jobs, and summarize and analyze empirical regularities related to cross-sectional, cross-country and cyclical variation in job flows.
187
The optimal level of experimentation
Giuseppe Moscarini,Lones Smith +1 more
TL;DR: In this article, a continuous time version of the problem is studied, where the authors assume that an impatient decision maker runs variable-size experiments at an increasing, strictly convex cost before choosing an irreversible action.
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.