Horizontal Innovation in the Theory of Growth and Development

• Authors: Gino Gancia and Fabrizio Zilibotti.
• BSE Working Paper: 112380 | September 15
• Keywords: appropiate technology , directed technical change , endogenous growth , expanding variety , imperfect competition
• JEL codes: D92, E32, F12,
• appropiate technology
• directed technical change
• endogenous growth
• expanding variety
• imperfect competition

We analyze recent contributions to growth theory based on the model of expanding variety of Romer (1990). In the first part, we present different versions of the benchmark linear model with imperfect competition. These include the “lab equipment” model, “labor-for-intermediates” and “directed technical change”. We review applications of the expanding variety framework to the analysis of international technology diffusion, trade, cross-country productivity differences, financial development and fluctuations. In many such applications, a key role is played by complementarities in the process of innovation.