Competition, Innovation, and the Business Cycle

69 Pages Posted: 7 Mar 2017

Date Written: January 31, 2012


This paper reports quantitative implications of a stochastic endogenous growth model in which growth displays a concave relationship with respect to competition. This model is consistent with unavoidable facts related to market structure, that other innovation-based endogenous growth models fail to replicate. This model shows promising empirical properties in both the short- and long-term. The current paper argues that this model might be better suited to measuring welfare implications of phenomena involving growth effects. An illustrative exercise reports and compares measurement of the welfare cost of imperfect competition and fluctuations.

Keywords: Innovation, Competition, Endogenous Growth, Real Business Cycles

JEL Classification: D60, E32, 040

Suggested Citation

Cahn, Christophe, Competition, Innovation, and the Business Cycle (January 31, 2012). Available at SSRN: or

Christophe Cahn (Contact Author)

Banque de France ( email )


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