A model of growth through creative destruction.
A model of endogenous growth is developed in which growth is driven by vertical innovations that involve creative destruction. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends negatively upon the amount expected next period. The paper analyzes positive and normative properties of stationary equilibria, and shows conditions for the existence of cyclical equilibria and no-growth traps. The growth rate may be more or less than optimal because a business-stealing effect counteracts the usual spillover and appropriability effects. In addition, innovations tend to be too small.
|Title:||A model of growth through creative destruction|
|Additional information:||Please see http://eprints.ucl.ac.uk/17807/ for the working paper version|
|UCL classification:||UCL > School of Arts and Social Sciences > Faculty of Social and Historical Sciences > Economics|
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