Competition-Led Endogenous Growth With Localized Technological Change

This paper presents an imperfect competition framework where growth is described as successful R&D investments in decreasing production-cost technologies. Innovation and imitation processes are modelled as activities requiring different amounts of investment, whose outcome is uncertaint both as regards the time it takes to occur and the amount of effective increase in productivity it allows. Furthermore, technological change is governed by localized spillovers, so that it can be analytically treated using the machinery of Markovian random fields. Preliminary results obtained through simulation exercises and a 'Mean Field' approximation allow us to evaluate how alternative assumptions on the nature of localization of technological change affect the market structure and the rate of growth of the average productivity of an imperfectly competitive economy. Hence, it is possible to provide some 'micro' insights to the growing macroeconomic literature dealing with local interaction among producers.