On the growth and welfare effects of monopolistic distortions |
| |
Authors: | Lutz G Arnold Christian Bauer |
| |
Institution: | (1) Department of Economics, University of Regensburg, 93 040 Regensburg, Germany;(2) Department of Economics, LMU Munich, 80539 Munich, Germany |
| |
Abstract: | The most fundamental proposition about growth and competition is that there is a tradeoff between static welfare and long-term
growth. This paper reconsiders this basic proposition in an expanding variety endogenous growth model with competitive markets
for “old” innovative products and for a traditional good. We shed light on some implications of monopolistic distortions which
tend to be ignored by standard models. First, no growth may be better than some growth, since modest positive growth potentially
requires sizeable static welfare losses. Second, the economy may converge to a steady state with zero growth, even though
a locally saddle-point stable steady state with positive growth exists if the initial share of “cheap” competitive markets
is sufficiently high, as this implies a relatively low demand for “expensive” innovative goods. Third, such a “no-growth trap”
may happen in a world economy made up of several countries engaged in free trade with each other. The policy implications
are that growth-enhancing policies may be misguided and that quick deregulation as well as quick trade liberalization can
lead to stagnation in the long term.
|
| |
Keywords: | Endogenous growth Competition Deregulation Poverty trap Trade liberalization |
本文献已被 SpringerLink 等数据库收录! |
|