RT Journal Article
T1 Bigger is better : market size, demand elasticity and innovation
A1 Desmet, Klaus
A1 Parente, Stephen L.
AB 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 amore crowded product space. This raises the price elasticity of demand and lowers markups. Firms, therefore, becomelarger to break even. This facilitates process innovation, as larger firms can amortize R&D costs over more goods. Wedemonstrate this mechanism in a standard model of process and product innovation. In doing so, we question someimportant results in the new trade and endogenous growth literatures
PB Wiley-Blackwell
SN 1468-2354 (online)
SN 0020-6598
YR 2010
FD 2010-05
LK https://hdl.handle.net/10016/4803
UL https://hdl.handle.net/10016/4803
LA eng
NO European Community's Seventh Framework Program
NO We acknowledge financial support of the European Commission (FP7-SSH-2007-1) and the Comunidad de Madrid (PROCIUDAD-CM).
DS e-Archivo
RD 18 may. 2024