Reference : Endogenous Technical Change in a Competitive Economy
Scientific journals : Article
Business & economic sciences : Macroeconomics & monetary economics
Endogenous Technical Change in a Competitive Economy
Hellwig, Martin [> >]
Irmen, Andreas mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)]
Journal of Economic Theory
[en] Endogenous Technical Change ; Perfect Competition ; Productivity Growth
[en] 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.<P>(This abstract was borrowed from another version of this item.)
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