Directed Technical Change, Scale E ects and Industrial Structure

This paper represents a rst attempt to devise a theoretical economic mechanism to explain the data on the distribution of rms and production across highand low-tech sectors. It builds a model of endogenous directed technical change that merges the expanding-variety with the quality-ladders mechanism, and explores the complementarity between them within a labequipment speci cation and under distinct regimes of scale e ects. The model generates a speci c set of balanced-growth-path results with respect to the relationship between industrial structure, concentration and economic growth. Under small positive scale e ects, the model is able to account for all the empirical regularities.