The Quality of Intermediate Goods: Growth and Welfare Implications.

• Autores: Yi-Ling Cheng, Juin-jen Chang
• Localización: Economic record, ISSN 0013-0249, Vol. 93, Nº. 302, 2017, págs. 434-447
• Idioma: inglés
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• Resumen

  • This paper explores the implications of the quality of intermediate goods in an endogenous growth model. We show that a trade-off exists between the quality and the variety of products, which creates a wedge between the market-equilibrium quality and the socially optimal quality. Relative to the social optimum, the equilibrium quality could be either under-supplied or over-supplied, depending on the productivity-enhancing effect as well as the increasing returns to production specialisation and business-stealing effects. [ABSTRACT FROM AUTHOR]