INCREASING PRODUCT VARIETY AND INNOVATION IN THE TERTIARY SECTOR: IMPACTS ON ECONOMIC GROWTH

By using R&D and product variety economic growth model, this study expands the scope of product innovation to include product increase in the tertiary sector and its consequent growth effects with reference to supply-side factors in the tertiary sector. Investigations addressed to growth effects of the invention of new goods and services in the model with extended supply side including tertiary sector. Investigating the balanced growth path of the theoretical model, we formulated two basic growth equations, the aggregate macro production function and the per-capita income in the steady growth path, that indicate the positive growth effects of increasing product variety. Following the estimation of these two equations, we conducted two statistical investigations, the estimation of the macro-production function based on Japanese macroeconomic data and a regression analysis based on the world development data by World Bank. The results of these two statistical works indicate positive growth effects of an increase in product variety.