Style Over Substance? Advertising, Innovation, and Endogenous Market Structure

Abstract We develop a two-industry R&D growth model with a free-entry endogenous market structure to evaluate the impact of industrial fundamentals on cross-industry differences of TFP growth and R&D intensity. Endogenous market structure in our model allows the firm’s market size to respond to the firm’s entry and exit which complements the models with an exogenous market structure in the previous literature. We find that surprisingly, an industry with a relatively high R&D productivity or appropriability exhibits “relatively” low in-house innovation growth and R&D intensity during transition. Moreoever, we examine the effects of R&D subsidies and patent breadth policies on industry differences by implementing both asymmetric and symmetric policy rules. We find that only asymmetric R&D subsidies have impacts on TFP growth and R&D intensity differences.

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MONETARY POLICY AND ENDOGENOUS MARKET STRUCTURE IN A SCHUMPETERIAN ECONOMY

Macroeconomic Dynamics ◽

10.1017/s1365100514000765 ◽

2014 ◽

Vol 20 (5) ◽

pp. 1127-1145 ◽

Cited By ~ 11

Author(s):

Angus C. Chu ◽

Lei Ji

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Interest Rate ◽

Market Structure ◽

Firm Size ◽

Growth Effect ◽

Nominal Interest Rate ◽

Long Run ◽

Endogenous Market Structure ◽

Number Of Firms

This study develops a monetary Schumpeterian model with endogenous market structure (EMS) to explore the effects of monetary policy on the number of firms, firm size, economic growth, and social welfare. EMS leads to different results from previous studies in which market structure is exogenous. In the short run, a higher nominal interest rate reduces the growth rates of innovation, output, and consumption and decreases firm size through reduction in labor supply. In the long run, a higher nominal interest rate reduces the equilibrium number of firms but has no steady-state effect on economic growth and firm size because of EMS. Although monetary policy has no long-run growth effect, increasing the nominal interest rate permanently reduces the levels of output, consumption, and employment. Taking transition dynamics into account, we find that welfare is decreasing in the nominal interest rate and the Friedman rule is optimal in this economy.

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Environmental policy and endogenous market structure

Resource and Energy Economics ◽

10.1016/j.reseneeco.2018.02.003 ◽

2018 ◽

Vol 52 ◽

pp. 186-215 ◽

Cited By ~ 3

Author(s):

Barbara Annicchiarico ◽

Luca Correani ◽

Fabio Di Dio

Keyword(s):

Environmental Policy ◽

Market Structure ◽

Endogenous Market Structure

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ENDOGENOUS MARKET STRUCTURE, OCCUPATIONAL CHOICE, AND GROWTH CYCLES

Macroeconomic Dynamics ◽

10.1017/s1365100514000157 ◽

2014 ◽

Vol 20 (1) ◽

pp. 70-94 ◽

Cited By ~ 4

Author(s):

Dimitrios Varvarigos ◽

Maria José Gil-Moltó

Keyword(s):

Growth Rate ◽

Market Structure ◽

Occupational Choice ◽

Structural Characteristics ◽

Propagation Mechanism ◽

Growth Cycles ◽

Endogenous Market Structure ◽

Growing Economy ◽

Firm Owners

We model an industry that supplies intermediate goods in a growing economy. Agents can choose whether to provide labor or to become firm owners and compete in the industry. The idea that entry is determined through occupational choice has major implications for the economy's dynamics. Particularly, the results show that economic dynamics are governed by endogenous volatility in the determination of both the number of industry entrants and in the growth rate of output. Consequently, we argue that occupational choice and the structural characteristics of the endogenous market structure can act as both the impulse source and the propagation mechanism of economic fluctuations.

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