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Using a balanced growth model with human capital accumulation and R&D activity, this paper examines how imperfect competition in the product market affects economic growth and the sectoral distribution of skills in the long-run. We find that steady-state growth is driven only by incentives to acquire human capital and is independent of scale effects. In the model imperfect competition in the product market has a positive growth effect, while influencing the allocation of skills to different economic activities. High R&D investment is not necessarily associated with high output growth.

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