The market Size Effect in Endogenous Growth Reconsidered

Hélène Latzer, Kiminori Matsuyama and Mathieu Parenti ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: This paper aims at disentangling two effects of the labor supply size on long-run growth that are traditionally undistinguishable under preference homotheticity: a scale effect, and a market size effect. To reach this goal, we present two horizontal-innovation models of endogenous growth with non-homothetic preferences. We demonstrate in particular that in such set-ups, keeping the economy's total effective labor supply constant, a "richer" country (i.e., with higher labor productivity and a smaller labor force) grows faster than a "poorer" country (i.e., with lower labor productivity and a larger labor force), leading the two countries to diverge

Keywords: Divergence; horizontal Innovation; Knowledge Spillover; Endogenous Growth; Balanced Growth Path; Variable price elasticity; Endogenous Markup; Nonhomotheticity; Direct Explicit Additivity; Indirect Explicit Additivity (search for similar items in EconPapers)
JEL-codes: O11 O31 O33 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2018-10
New Economics Papers: this item is included in nep-gro and nep-ino
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ftp://mse.univ-paris1.fr/pub/mse/CES2018/18032.pdf (application/pdf)

Related works:
Working Paper: The Market Size Effect in Endogenous Growth Reconsidered (2018)
Working Paper: The Market Size Effect in Endogenous Growth Reconsidered (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:18032

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