Wednesday, October 27, 2010
Posted by D. Daniel Sokol
Daria Onori (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; University of Rome "La Sapienza", Faculty of Economics) addresses Competition and growth: reinterpreting their relationship.
ABSTRACT: In this paper we modify a standard quality ladder model by assuming that R&D is driven by outsider firms and the winners of the race sell licenses over their patents, instead of entering directly the inter- mediate good sector. As a reward they get the aggregate profit of the industry. Moreover, in the intermediate good sector firms compete à la Cournot and it is assumed that there are spillovers represented by strategic complementarities on costs. Our goal is to prove that there exists an interval of values of the spillover parameter such that the relationship between competition and growth is an inverted-U-shape.