Three theorems on growth and competition

Lutz Georg Arnold () and Christian J. Bauer ()

No 423, Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft from University of Regensburg, Department of Economics

Abstract: This paper proves three theorems on growth and competition in a standard increasing variety endogenous growth model and draws conclusions for second-best competition policies. First, no growth may be better than some growth, since modest positive growth potentially requires sizeable static welfare losses. Second, the economy may converge to a steady state with zero growth, even though another (saddle-point stable) steady state with positive growth exists if the initial share of "cheap" competitive markets is sufficiently high, as this implies a relatively low demand for "expensive" innovative goods. Third, such a "no-growth trap" may happen in a world economy made up of several countries engaged in free trade with each other. As for competition policy, this implies that growth-enhancing policies maybe misguided and that quick deregulation as well as quick trade liberalization can lead to stagnation in the long term.

Keywords: endogeneous growth; competition; deregulation; poverty trap; trade liberalization; Armutsfalle; Handelsliberalisierung; Endogenes Wirtschaftswachstum; Wettbewerb; Deregulierung (search for similar items in EconPapers)
JEL-codes: F15 F43 O31 O34 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-int
Date: Written
Note: This paper is part of http://www.opus-bayern.de/uni-regensburg/schriftenreihen_ebene2.php?sr_id=3
View list of references

Downloads: (external link)
http://www.opus-bayern.de/uni-regensburg/volltexte ... old_Bauer_DP_423.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bay:rdwiwi:812

Access Statistics for this paper

More papers in Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft from University of Regensburg, Department of Economics
Contact information at EDIRC.
Series data maintained by Marc Reymann (). This e-mail address is bad, please contact .