Love of novelty: a source of innovation-based growth… or underdevelopment traps?

Abstract This study develops a new dynamic general equilibrium model to explore the role of people’s love novelty as cultural preference in innovation and innovation-based growth. The considers (a) an infinitely lived representative consumer who has standard love-of-variety preferences for differentiated products additional love-of-novelty (b) technological progress driven by two costly time-consuming activities, product development existing development. We demonstrate that consumers’ is source growth, wherein economies with moderate can achieve long-run growth through endogenous cycles between periods which active those active. However, if too weak or strong, economy caught underdevelopment trap less no also provide some suggestive empirical evidence supports our theoretical predictions.