Discretely Innovating: The Effect of Barriers to Entry on Innovation and Growth

Steven Bond-Smith

No WP1804, Bankwest Curtin Economics Centre Working Paper series from Bankwest Curtin Economics Centre (BCEC), Curtin Business School

Abstract: This article considers the effect of a discrete entry barrier (i.e. an integer number of firms) in an endogenous growth model to draw conclusions about the relationship between contestability, innovation and growth. Sector-specific workers provide a tool for calibrating numerical examples. Sectors with lower entrepreneurial contestability have lower innovation and sectors characterized by Cournot oligopoly have lower innovation than sectors characterized by Bertrand. Wage inequality varies depending on the extent that the entry barrier is binding upon a marginal entrant. The model offers policy implications to support entrepreneurial entry, particularly in relatively small or isolated regional economies.

Keywords: innovation; contestability; Cournot; Bertrand; competition; endogenous growth (search for similar items in EconPapers)
JEL-codes: L13 O41 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-12
New Economics Papers: this item is included in nep-com, nep-ent, nep-gro and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ozl:bcecwp:wp1804

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