Use costs in a two-R&D-sector model

Nicoletti Giulio
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Nicoletti Giulio: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 2003023, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper we assess the properties of scale-free endogenous growth models in presence of use costs for the final users. As bench-mark we use Segerstrom (2000) two R&D sector model. When use costs apply to both types of innovation we find counterintuitive results with respect to the standard Endogenous Growth literature ; use costs can increase growth. This is due to the presence of both increasing returns in the research functions and the population growth condition. When costs apply to vertical innovations only we can establish more intuitive results : under mild conditions use costs decrease the rate of vertical innovation and of overall economic growth.

Keywords: Endogenous Growth; Scale effect; Adoption costs (search for similar items in EconPapers)
JEL-codes: O32 O41 (search for similar items in EconPapers)
Pages: 24
Date: 2003-11-01
New Economics Papers: this item is included in nep-ino and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2003023

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