Endogenous Growth and Structural Change Through Vertical and Horizontal Innovations

37 Pages Posted: 12 Feb 2014 Last revised: 3 Feb 2015

See all articles by Anton A. Bondarev

Anton A. Bondarev

WWZ Universität Basel

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Date Written: February 1, 2014

Abstract

This paper combines horizontal and vertical innovations to build an endogenous growth model that allows for structural change. Older technologies are continuously replaced by newer ones due to creative destruction and new technologies appear as a result of horizontal innovations and as a result of consumers’ preferences for variety. We assume fixed operational costs for the manufacturing sector and an endogenously determined price of the patent for each new technology. The duration of a patent is not limited but every industry is profitable only for a certain period of time, thus making the effective time of existence of the technology endogenous and finite. We demonstrate that such an economy exhibits constant growth rates that are proportional to the average productivity growth, despite the ongoing disappearance of older technologies from the industry.

Keywords: endogenous growth, creative destruction, endogenous structural change, horizontal innovation, endogenous patents

JEL Classification: O31, O34, O41

Suggested Citation

Bondarev, Anton A. and Greiner, Alfred, Endogenous Growth and Structural Change Through Vertical and Horizontal Innovations (February 1, 2014). Bielefeld Working Papers in Economics and Management No. 03-2014, Available at SSRN: https://ssrn.com/abstract=2393435 or http://dx.doi.org/10.2139/ssrn.2393435

Anton A. Bondarev

WWZ Universität Basel ( email )

Basel, 4051
Switzerland

Alfred Greiner (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

HOME PAGE: http://phoenix.wiwi.uni-bielefeld.de/lehrbereiche/vwl/wipol

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