Endogenous Technical Change in a Competitive Economy

Martin Hellwig and Andreas Irmen

No 99-53, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: We develop a model of endogenous growth in an economy with competitive markets. Technical change arises from the intentional actions of entrepreneurs looking for profits. Opportunities for such profits stem from inframarginal rents. This provides a counterexample to the widespread view that endogenous technical change is possible only if innovating firms can expect to reap monopoly or oligopoly rents. The model has a unique equilibrium, which involves steady growth at a positive rate. Equilibrium growth is inefficiently low because knowledge spillover effects are neglected. The inefficiency can be eliminated by an interest rate subsidy.

Pages: 40 pages
Date: 1999-03-22
New Economics Papers: this item is included in nep-dev, nep-mic and nep-tid
Note: Financial assistance from Deutsche Forschungsgemeinschaft under the program
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Endogenous Technical Change in a Competitive Economy (2001)
Working Paper: Endogenous technical change in a competitive economy (1999)
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