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Quality Ladders in the Theory of Growth

Quality Ladders in the Theory of Growth Abstract We develop a model of repeated product improvements in a continuum of sectors. Each product follows a stochastic progression up a quality ladder. Progress is not uniform across sectors, so an equilibrium distribution of qualities evolves over time. But the rate of aggregate growth is constant. The growth rate responds to profit incentives in the R&D sector. We explore the welfare properties of our model. Then we relate our approach to an alternative one that views product innovation as a process of generating an ever-expanding range of horizontally differentiated products. Finally, we apply the model to issues of resource accumulation and international trade. This content is only available as a PDF. © 1991 The Review of Economic Studies Limited http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

Quality Ladders in the Theory of Growth

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References (22)

Publisher
Oxford University Press
Copyright
© 1991 The Review of Economic Studies Limited
ISSN
0034-6527
eISSN
1467-937X
DOI
10.2307/2298044
Publisher site
See Article on Publisher Site

Abstract

Abstract We develop a model of repeated product improvements in a continuum of sectors. Each product follows a stochastic progression up a quality ladder. Progress is not uniform across sectors, so an equilibrium distribution of qualities evolves over time. But the rate of aggregate growth is constant. The growth rate responds to profit incentives in the R&D sector. We explore the welfare properties of our model. Then we relate our approach to an alternative one that views product innovation as a process of generating an ever-expanding range of horizontally differentiated products. Finally, we apply the model to issues of resource accumulation and international trade. This content is only available as a PDF. © 1991 The Review of Economic Studies Limited

Journal

The Review of Economic StudiesOxford University Press

Published: Jan 1, 1991

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