Corresponding author: Vincenzo Denicolò, Department of Economics, University of Leicester, University Road, Leicester LE1 7RH, UK. Email: email@example.com.
Leadership Cycles in a Quality-Ladder Model of Endogenous Growth*
Version of Record online: 9 MAR 2012
© 2012 The Author(s). The Economic Journal © 2012 Royal Economic Society
The Economic Journal
Volume 122, Issue 561, pages 618–650, June 2012
How to Cite
Denicolò, V. and Zanchettin, P. (2012), Leadership Cycles in a Quality-Ladder Model of Endogenous Growth. The Economic Journal, 122: 618–650. doi: 10.1111/j.1468-0297.2012.02510.x
We thank Gianni De Fraja, Richard Gilbert, Bronwyn Hall, Antonio Minniti, Ludovic Renou and seminar audiences at Berkeley, Paris and Leicester for helpful comments and discussions.
- Issue online: 1 JUN 2012
- Version of Record online: 9 MAR 2012
- Accepted manuscript online: 16 JAN 2012 10:05AM EST
- Submitted: 20 July 2011 Accepted: 15 September 2011
We study a quality-ladder model of endogenous growth that produces stochastic leadership cycles. Over a cycle, industry leaders can innovate several successive times in the same sector before being replaced by a new entrant. Initially, new leaders do much of the research but they then tend to rest on their laurels and are eventually overtaken. The model generates a skewed firm size distribution and a deviation from Gibrat's law that accord with the empirical evidence. We also find conditions under which policy should favour R&D by incumbents, not outsiders, and show that stronger patent protection may reduce innovation and growth.