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Bigger is better : market size, demand elasticity and innovation

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorDesmet, Klaus
dc.contributor.authorParente, Stephen L.
dc.date.accessioned2009-07-15T15:09:36Z
dc.date.accessioned2011-02-01T12:06:05Z
dc.date.available2011-02-01T12:06:05Z
dc.date.issued2010-05
dc.description.abstractThis article proposes a novel mechanism whereby larger markets increase competition and facilitate process innovation. Larger markets, in the sense of more people or more open trade, support a larger variety of goods, resulting in a more crowded product space. This raises the price elasticity of demand and lowers markups. Firms, therefore, become larger to break even. This facilitates process innovation, as larger firms can amortize R&D costs over more goods. We demonstrate this mechanism in a standard model of process and product innovation. In doing so, we question some important results in the new trade and endogenous growth literatures
dc.description.sponsorshipEuropean Community's Seventh Framework Program
dc.description.sponsorshipWe acknowledge financial support of the European Commission (FP7-SSH-2007-1) and the Comunidad de Madrid (PROCIUDAD-CM).en
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dc.identifier.bibliographicCitationInternational Economic Review, 2010, v. 51, n.2, pp. 319-333
dc.identifier.doi10.1111/j.1468-2354.2010.00581.x
dc.identifier.issn1468-2354 (online)
dc.identifier.issn0020-6598
dc.identifier.publicationfirstpage319
dc.identifier.publicationissue2
dc.identifier.publicationlastpage333
dc.identifier.publicationtitleInternational Economic Review
dc.identifier.publicationvolume51
dc.identifier.urihttps://hdl.handle.net/10016/4803
dc.language.isoeng
dc.publisherWiley-Blackwell
dc.relation.isversionofhttp://hdl.handle.net/10016/14361
dc.relation.projectIDinfo:eu-repo/grantAgreement/EC/FP7/225551
dc.relation.publisherversionhttp://dx.doi.org/10.1111/j.1468-2354.2010.00581.x
dc.rights© the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
dc.rights.accessRightsopen access
dc.subject.ecienciaEconomía
dc.titleBigger is better : market size, demand elasticity and innovation
dc.typeresearch article*
dc.type.hasVersionAM*
dc.type.reviewPeerReviewed
dspace.entity.typePublication
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