TY  - JOUR
AU  - Grossman,Gene M.
AU  - Helpman,Elhanan
TI  - Quality Ladders in the Theory of Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3099
PY  - 1991
Y2  - August 1991
UR  - http://www.nber.org/papers/w3099
L1  - http://www.nber.org/papers/w3099.pdf
N1  - Author contact info:
Gene M. Grossman
International Economics Section
Department of Economics
Princeton University
Princeton, NJ 08544
Tel: 609/258-4823
Fax: 609/258-1374
E-Mail: grossman@princeton.edu

Elhanan Helpman
Department of Economics
Harvard University
1875 Cambridge Street
Cambridge, MA 02138
Tel: 617-495-4690
Fax: 617-495-7730
E-Mail: ehelpman@harvard.edu
AB  - We develop a model of repeated product improvements in a continuum of sectors. Each product follows a stochastic progression up a quality ladder. Progress is not uniform across sectors, so an equilibrium distribution of qualities evolves over time. But the rate of aggregate growth is constant. The growth rate responds to profit incentives in the R&D sector. We explore the welfare properties of our model. Then we relate our approach to an alternative one that views product innovation as a process of generating an ever expanding range of horizontally differentiated products. Finally, we apply the model to issues of resource accumulation and international trade.
ER  -