Monday, June 10, 2013
Posted by D. Daniel Sokol
Daria Onori (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), IRES explains 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 intermediate good sector. As a reward they get the aggregate profit of the industry. Moreover, in the intermediate good sector firms compete a la Cournot and it is assumed that there are spillovers represented by strategic complementarities on costs. We 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.