Innovate to Lead or Innovate to Prevail: When do Monopolistic Rents Induce Growth?

December 27, 2019

Preview Citation

Format: Chicago

Roberto Piazza, and Yu Zheng. Innovate to Lead or Innovate to Prevail: When do Monopolistic Rents Induce Growth?, (USA: International Monetary Fund, 2019) accessed November 12, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper extends the Schumpeterian model of creative destruction by allowing followers’ cost of innovation to increase in their technological distance from the leader. This assumption is motivated by the observation the more technologically ad- vanced the leader is, the harder it is for a follower to leapfrog without incurring extra cost for using leader’s patented knowledge. Under this R&D cost structure, leaders innovate to increase their technological advantage so that followers will eventually stop innovating, allowing leadership to prevail. A new steady state then emerges featuring both leaders and followers innovating in few industries with low aggregate growth.

Subject: Consumption, Labor, Labor supply, National accounts, Skilled labor, Technology, Wages

Keywords: Consumption, Equilibrium behavior, Equilibrium economy, Equilibrium effect, Equilibrium path, Labor supply, Saddle path, Skilled labor, Wages, WP

Publication Details

Pages:

56
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/294
Stock No:

WPIEA2019294
ISBN:

9781513512518
ISSN:

1018-5941

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