Wants and past knowledge: Growth cycles with emerging industries

Ryo Horii

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 2, 220-238

Abstract: This paper develops a theory of endogenous growth cycles focusing on the interaction between consumers' desire to satisfy an indefinite range of wants and firms' incentive to utilize knowledge from past production experiences. We show that firms endogenously form a number of distinguishable industries as accumulated knowledge induces them to agglomerate in the technology space. Knowledge accumulation in existing industries reduces production costs, but, as the diminishing returns from learning sets in, some firms start to adopt previously unexplored technologies so that their new goods fit consumers' unsatisfied wants and attract large demand. Thus, sporadic emergence of new industries generates growth cycles, where both the timing and the new technology to be adopted are endogenously determined. New industries based on new technology reduce the rate of per capita GDP growth in the initial phase, but nonetheless are indispensable for sustained economic growth in the long run.

Keywords: Endogenous growth; Technology choice; Wants; Knowledge; Cycles (search for similar items in EconPapers)
JEL-codes: L16 O31 O33 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Wants and Past Knowledge: Growth Cycles with Emerging Industries (2006)
Working Paper: Wants and Past Knowledge: Growth Cycles with Emerging Industries (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:2:p:220-238

DOI: 10.1016/j.jedc.2011.08.001

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