This paper combines horizontal and vertical innovations to build an endogenous

growth model that allows for structural change. Older technologies are

continuously replaced by newer ones due to creative destruction and new technologies

appear as a result of horizontal innovations and as a result of consumers’

preferences for variety. We assume fixed operational costs for the manufacturing

sector and an endogenously determined price of the patent for each new technology.

The duration of a patent is not limited but every industry is profitable

only for a certain period of time, thus making the effective time of existence of

the technology endogenous and finite. We demonstrate that such an economy

exhibits constant growth rates that are proportional to the average productivity

growth, despite the ongoing disappearance of older technologies from the industry.