Bigger is better : market size, demand elasticity and innovation

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Show simple item record Desmet, Klaus Parente, Stephen L. 2009-07-15T15:09:36Z 2011-02-01T12:06:05Z 2011-02-01T12:06:05Z 2010-05
dc.identifier.bibliographicCitation International Economic Review, 2010, v. 51, n.2, pp. 319-333
dc.identifier.issn 1468-2354 (online)
dc.identifier.issn 0020-6598
dc.description.abstract This 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.sponsorship European Community's Seventh Framework Program
dc.description.sponsorship We acknowledge financial support of the European Commission (FP7-SSH-2007-1) and the Comunidad de Madrid (PROCIUDAD-CM).
dc.format.mimetype application/pdf
dc.format.mimetype text/plain
dc.format.mimetype application/octet-stream
dc.format.mimetype application/octet-stream
dc.format.mimetype application/octet-stream
dc.language.iso eng
dc.publisher Wiley-Blackwell
dc.rights © the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
dc.title Bigger is better : market size, demand elasticity and innovation
dc.type article PeerReviewed
dc.subject.eciencia Economía
dc.identifier.doi 10.1111/j.1468-2354.2010.00581.x
dc.rights.accessRights openAccess
dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/225551
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 319
dc.identifier.publicationissue 2
dc.identifier.publicationlastpage 333
dc.identifier.publicationtitle International Economic Review
dc.identifier.publicationvolume 51
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