Competing Engines of Growth: Innovation and Standardization
We study a dynamic general equilibrium model where innovation takes the form of the introduction new goods, whose production requires skilled workers. Innovation is followed by a costly process of standardization, whereby these new goods are adapted to be produced using unskilled labor. Our framework highlights a number of novel results. First, standardization is both an engine of growth and a potential barrier to it. As a result, growth in an inverse U-shaped function of the standardization rate (and of competition). Second, we characterize the growth and welfare maximizing speed of standardization. We show how optimal IPR policies affecting the cost of standardization vary with the skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that the interplay between innovation and standardization may lead to multiple equilibria. Finally, we study the implications of our model for the skill-premium and we illustrate novel reasons for linking North-South trade to intellectual property rights protection.
We thank seminar participants at the SED Annual Meeting (Boston, 2008), Bank of Italy, the Kiel Institute, CERGE-EI, University of Alicante and the REDg-Dynamic General Equilibrium Macroeconomics Workshop (Madrid, 2008) for comments. Gino Gancia acknowledges financial support from the Barcelona GSE, the Government of Catalonia and the ERC Grant GOPG 240989. Fabrizio Zilibotti acknowledges financial support from the ERC Advanced Grant IPCDP-229883. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Acemoglu, Daron & Gancia, Gino & Zilibotti, Fabrizio, 2012. "Competing engines of growth: Innovation and standardization," Journal of Economic Theory, Elsevier, vol. 147(2), pages 570-601.e3. citation courtesy of