Big Data

Competition And Growth: Reinterpreting Their Relationship

Date Added: Jul 2010
Format: PDF

In this paper the authors modify a standard quality ladder model by assuming that R&D is driven by outsider firms and the winners of the race sell licenses over their patents, instead of entering directly the intermediate good sector. As a reward they get the aggregate profit of the industry. Moreover, in the intermediate goods sector firms compete ? la Cournot and it is assumed that there are spillovers represented by strategic complementarities on costs. The goal is to prove that there exists an interval of values of the spillover parameter such that the relationship between competition and growth is an inverted-U-shape.