TY  - JOUR
AU  - Grossman,Gene M.
AU  - Helpman,Elhanan
TI  - Quality Ladders and Product Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3201
PY  - 1989
Y2  - December 1989
UR  - http://www.nber.org/papers/w3201
L1  - http://www.nber.org/papers/w3201.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 two-country model of endogenous innovation and imitation in order to study the interactions between these two processes. Firms in the North race to bring out the next generation of a set of technology-intensive products. Each product potentially can be improved a countably infinite number of times, but quality improvements require the investment of resources and entail uncertain prospects of success. In the South, entrepreneurs invest resources in order to learn the production processes that have been developed in the North. All R&D investment decisions are made by forward looking, profit maximizing entrepreneurs. The steady-state equilibrium is characterized by constant aggregate rates of innovation and imitation. We study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning. 
ER  -