Competing Engines of Growth: Innovation and Standardization

48 Pages Posted: 23 Apr 2010

See all articles by Daron Acemoglu

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Gino Gancia

Queen Mary University of London; Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI)

Fabrizio Zilibotti

Yale University; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: April 22, 2010

Abstract

We study a dynamic general equilibrium model where innovation takes the form of the introduction new goods, whose production requires skilled workers. Innovation is followed by a costly process of standardization, whereby these new goods are adapted to be produced using unskilled labor. Our framework highlights a number of novel results. First, standardization is both an engine of growth and a potential barrier to it. As a result, growth in an inverse U-shaped function of the standardization rate (and of competition). Second, we characterize the growth and welfare maximizing speed of standardization. We show how optimal IPR policies affecting the cost of standardization vary with the skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that the interplay between innovation and standardization may lead to multiple equilibria. Finally, we study the implications of our model for the skill-premium and we illustrate novel reasons for linking North-South trade to intellectual property rights protection.

Keywords: Growth, technology adoption, competition policy, intellectual property rights

JEL Classification: F43, O31, O33, O34

Suggested Citation

Acemoglu, Daron and Gancia, Gino and Zilibotti, Fabrizio, Competing Engines of Growth: Innovation and Standardization (April 22, 2010). Available at SSRN: https://ssrn.com/abstract=1594115 or http://dx.doi.org/10.2139/ssrn.1594115

Daron Acemoglu (Contact Author)

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Gino Gancia

Queen Mary University of London ( email )

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Fabrizio Zilibotti

Yale University ( email )

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Centre for Economic Policy Research (CEPR)

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