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Growth Under Perfect Competition

David K. Levine and Michele Boldrin

October 28, 1997

Revised: December 23, 1998

Abstract: We construct an abstract, dynamic general equilibrium model of innovation, growth and cycles in the spirit of Schumpeter's Theory of Economic Development. Despite the existence of infinitely many commodities and activities, the use of which may increase over time, we give a standard characterization of equilibrium using the first and second welfare theorems, and a standard transversality condition. We consider a series of examples characterizing the dynamic properties of equilibria and show that many results discussed in the "endogenous growth'' literature can be obtained as special cases of the model we propose.