Abstract
In this paper, we introduce an agent called a secondary intermediate-goods producer who puts various types of intermediate-goods together into Romer's endogenous growth model, and studies the relationship between the market structure and growth rate. When the secondary intermediate-goods producers' market is competitive, their profit becomes zero. On the other hand, when the secondary intermediate-goods producers' market is monopolistic, they can make a profit. Subsequently, we show if a secondary intermediate-goods producer pays all of the profit for households, the growth rate is lower than under a competitive environment. However, if the government levies a part of the profit and invests in primary intermediate-goods or R&D, the growth rate can be higher than under a competitive environment depending on the investment rate. Finally, we compare the equilibrium rates of growth derived above the optimal rate.
JEL Classification: L12, O31
