Appendix Solution of the Model in Section 5.1.2

We now prove the claims in Section 5.1.2 by fully solving the vertical innovation model. Combining p(i) = r/α with


si183_e  (18.67)

and solving for x(i) implies


si184_e  (18.68)

Taking wage rate w as given, ex ante of production, producer i chooses R&D labor input in period t to maximize


si185_e  (18.69)

where future profits πt + 1(i) ≡ ( ...

Get Handbook of the Economics of International Migration now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.