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Competition and Growth: Reinterpreting their Relationship
Author(s) -
Onori Daria
Publication year - 2015
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12063
Subject(s) - spillover effect , competition (biology) , economics , externality , welfare , microeconomics , interval (graph theory) , mathematics , market economy , combinatorics , ecology , biology
In this paper we modify a standard quality ladder model by assuming that the winners of the R&D race sell licenses over their to the intermediate good firms. These ones compete à la C ournot and it is assumed that there are positive spillovers on costs: in‐house and rivals' experience reduces firms' cost. We 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 . In this interval, overall welfare is inverted U ‐shaped in competition for lower values of the externality parameter and increasing for higher values.