Template-type: ReDIF-Paper 1.0
Author-Name: Garcia-Torres, M. Abraham
Author-Email: abrahamgarciatorres@gmail.com
Author-Workplace-Name: UNU-MERIT
Title: Habit Formation, Demand and Growth through Product Innovation
Abstract: Growth theory has mainly focused on process innovation, either through 
	 an increase in quality of the product or a reduction on the cost. The 
	 main contributions in growth theory that includes product innovation has 
	 been done in the Dixit and Stiglitz framework. This framework works with 
	 oversimplifying restrictions on the demand side: Preferences of 
	 consumers are assumed to be constant and equal for all goods. This paper 
	 introduces vertical and horizontal differentiation in final goods. Goods 
	 are different in their habit formation parameters. Innovation is not the 
	 normal reduction in costs but an increase in the capacity to satisfy 
	 consumers’ needs. Growth in this model is defined as the growth of the 
	 final value added.
Classification-JEL: O47, E21, D11, O31, M37
Keywords: growth, product innovation, technical change, consumption
Series: UNU-MERIT Working Papers
Creation-Date: 2009
Number: 012
File-URL: http://www.merit.unu.edu/publications/wppdf/2009/wp2009-012.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2009012