Market concentration and technological innovation in a dynamic model of growth and distribution

Abstract

This paper develops a post Keynesian macromodel of growth and distribution in which endogenous technological innovation plays a pivotal role. The innovationrate is made quadratic in market concentration, to capture a plausible neo-Schumpeterian non-linear influence of market structure on firms' propensity to innovate. Concentration is endogenous, though, since under neo-Schumpeterian competition the relation between market structure and technical change cuts both ways. Investment will then be non-linear in concentration, and the effect of changes in concentration on capacity utilisation, growth and distribution will depend on the level of concentration. Demand also plays a role, with capacity utilisation and growth rising with the wage share. The dynamic stability properties of the system will depend on the direction and relative strength of the technological innovation effects with respect to the demand ones, and on the relative bargaining power of workers and capitalists. JEL Codes: O41, E25, O32, L10

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