Perfectly Competitive Innovation
University of Minnesota - Twin Cities - Department of Economics; Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)
David K. Levine
Washington University in St. Louis
March 1, 2002
We construct a competitive model of innovation and growth under constant returns to scale. Previous models of growth under constant returns cannot model technological innovation. Current models of endogenous innovation rely on the interplay between increasing returns and monopolistic markets. In fact, established wisdom claims monopoly power to be instrumental for innovation and sees the nonrivalrous nature of ideas as a natural conduit to increasing returns. The results here challenge the positive description of previous models and the normative conclusion that monopoly through copyright and patent is socially beneficial.
Keywords: Innovation, Patents, Endogenous Growth, Intellectual Property
JEL Classification: O30, O31, O34, O40, K21, D51, D62working papers series
Date posted: July 31, 2008
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