Monopoly Power in Human Capital-Based Growth

Using a balanced growth model with human capital accumulation and R&D activity, in this paper we study the long-run effect of imperfect competition in the product market on economic growth and the sectoral distribution of skills. We find that steady-state growth is driven only by incentives to acquire human capital and is independent of scale effects. In the model imperfect competition in the product market has a positive growth effect, while influencing the allocation of skills to the different economic activities. We also observe that high R&D investment is not always associated with high output growth.