Competition in an Increasing Variety Growth Model

Christian Bauer ()

No 1, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: This paper introduces competitive markets in the Grossman- Helpman [1991, ch. 3] increasing variety growth model. In this standard model of endogenous growth theory, competition has a negative incentive effect. Accordingly, a larger resource base is required to sustain long run growth. In an intermediate range, however, there is path dependence. In this case, too much initial competition may ultimately stall the growth process. Moreover, by introducing asymmetry in market-power, competition gives rise to static welfare losses. In economies with a small positive growth rate, welfare losses due to varying mark-up factors may be large enough to offset the benefits of growth.

JEL-codes: O34 O41 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2006-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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