Quality Ladders in the Theory of Growth

41 Pages Posted: 14 Jul 2000

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: September 1989

Abstract

We develop a model of repeated product improvements in a continuum of sectors. Each product follows a stochastic progression up a quality ladder. Progress is not uniform across sectors, so an equilibrium distribution of qualities evolves over time. But the rate of aggregate growth is constant. The growth rate responds to profit incentives in the R&D sector. We explore the welfare properties of our model. Then we relate our approach to an alternative one that views product innovation as a process of generating an ever expanding range of horizontally differentiated products. Finally, we apply the model to issues of resource accumulation and international trade.

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan, Quality Ladders in the Theory of Growth (September 1989). NBER Working Paper No. w3099. Available at SSRN: https://ssrn.com/abstract=227471

Gene M. Grossman (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

300 Fisher Hall
Prospect Avenue
Princeton, NJ 08544-1021
United States
609-258-4823 (Phone)
609-258-1374 (Fax)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Elhanan Helpman

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-4690 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
124
Abstract Views
1,996
rank
227,655
PlumX Metrics