In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their...

The traditional approach makes investment in innovation constrained by market structure. This paper explores the causality from innovation to market structure. Omitting this causality direction on empirical models may explain empirical problems and contradictions on these models.