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: Suggested Citation