We study a quality-ladder model of endogenous growth that produces stochastic leadership cycles. Over a cycle, industry leaders can innovate several successive times in the same sector before being replaced by a new entrant. Initially, new leaders do much of the research but they then tend to rest on their laurels and are eventually overtaken. The model generates a skewed firm size distribution and a deviation from Gibrat’s law that accord with the empirical evidence. We also find conditions under which policy should favour R&D by incumbents, not outsiders, and show that stronger patent protection may reduce innovation and growth.
V. Denicolo', P. Zanchettin (2012). Leadership cycles in a quality ladder model of endogenous growth. ECONOMIC JOURNAL, 122, 618-650 [10.1111/j.1468-0297.2012.02510.x].
Leadership cycles in a quality ladder model of endogenous growth
DENICOLO', VINCENZO;ZANCHETTIN, PIERCARLO
2012
Abstract
We study a quality-ladder model of endogenous growth that produces stochastic leadership cycles. Over a cycle, industry leaders can innovate several successive times in the same sector before being replaced by a new entrant. Initially, new leaders do much of the research but they then tend to rest on their laurels and are eventually overtaken. The model generates a skewed firm size distribution and a deviation from Gibrat’s law that accord with the empirical evidence. We also find conditions under which policy should favour R&D by incumbents, not outsiders, and show that stronger patent protection may reduce innovation and growth.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.