COMPETITON AND GROWTH IN AN ENDOGENOUS GROWTH MODEL WITH EXPANDING PRODUCT VARIETY WITHOUT SCALE EFFECTS REVISITED

This paper shows that the results of Bianco (2006) depend critically on the assumption that there are no difference between the intermediate goods share in final output, the returns of specialization and the degree of market power of monopolistic competitors. In this paper, we disentangle the market power parameter from the intermediate goods share in final output and the returns to specialization. The main result of this paper is the death of the inverted-U shape relationship between competition and growth. Indeed, we find a decreasing relationship between competition and growth which is due to the composition of two negative effects on growth : resource allocation and Schumpeterian effects.