My PhD

Competition, knowledge & economic growth

Standard theory: no competition-growth link

Posted by John Humphreys on May 8, 2007

Mainstream competition theory is the theory of perfect competition (and also the theory of monopolistic-competition). Both of these theories result in an equilibrium position with no growth or economic change.

Mainstream growth theory explains how growth is caused by the advancement of technology. In New Growth Theory it is suggested that technology is created by investments in Research & Development (R&D). Growth theory has little (if anything) to say about competition.

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