Competition, Market Selection and Growth

Bibliographic Data

ID9706982
AuthorsVincenzo Denicolò (0000-0001-8371-4241, University of Bologna), Piercarlo Zanchettin (0000-0003-0559-869X, University of Leicester)
Year2010
Volume120
Issue545
Pages761-785
Publication date2010-06-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2009.02313.x
OpenAlexW1493847525
LanguageEN
Citations received2
References cited27

We study the effect of the competitive selection process on the economy's rate of growth. In an extension of standard quality-ladder models of endogenous growth, we allow for the possibility that in each period several asymmetric firms (representing an endogenously determined number of past innovators) may be simultaneously active in an industry. Stronger competitive pressure then has conflicting effects on the incentive to innovate, lowering prices but also selecting the more efficient firms. We show that the market selection effect of competition always increases the incentive to innovate and find circumstances in which it can outweigh the traditional negative effect of lower prices. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009

Competition (biology · Economics · Endogenous growth theory · Incentive · Industrial organization · Market economy · Microeconomics · Quality (philosophy · Selection (genetic algorithm · Economic Growth and Productivity · Economic theories and models · Firm Innovation and Growth