A competitive idea-based growth model. Issue 3 (2nd April 2020)

• Record Type: Journal Article
• Authors: Marchese, Carla; Privileggi, Fabio
• Is Part Of: Economics of innovation and new technology. Volume 29:Issue 3(2020)
• Page Start: 313
• Page End: 330
• Publication Date: 2020-04-02
• Subjects: Endogenous growth -- competitive markets -- intangible inputs -- Lindahl prices; C61 -- E10 -- O31 -- O41; Technological innovations -- Economic aspects -- Periodicals; 338.06405
• DOI: 10.1080/10438599.2019.1616663
• Languages: English
• ISSNs: 1043-8599

Abstract

ABSTRACT: In this paper, we present a model in which endogenous growth arises in competitive markets. Knowledge is described as a factor used directly in the final goods' production. Firms demand both basic nonrival knowledge contents, which are supplied jointly and inelastically with raw labor, and further contents supplied by patent holders. This fact, together with Lindahl prices for knowledge, allows competition to work, while it also implies that workers' income share declines overtime. In a first version of the model with constant cost of knowledge production, the first best is attained. In a further version of the model, in which the cost of knowledge production is allowed to change over time and thus intertemporal externalities arise, in a decentralized economy a second best equilibrium occurs in the transitional period, while in the long run there is convergence to efficiency.