GROWTH THROUGH QUALITY IMPROVEMENTS AND PRODUCT CYCLE IN AN OVERLAPPING GENERATIONS MODEL

We present in this article an endogenous growth model, in the framework of an overlapping generations model. Growth is the result of product improvements, which come from research activity. In each sector, the arrival of an innovation is a risky event, but this process leads to a smooth growth at the aggregate level. We determine the dynamics of our model and show that two economies which only differ by their population size can have different dynamics. Then, we apply the basic model to open economics, and we modelize Vernon's idea about product life cycle. We show that for such a structure of international trade, parameters as the population sizes or the discount rates influence crucialy the growth rate of the economies.