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Legal Institutions, Innovation, And Growth

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  • LUCA ANDERLINI
  • LEONARDO FELLI
  • GIOVANNI IMMORDINO
  • ALESSANDRO RIBONI

Abstract

We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a flexible one (law set after observing current technology). The flexible system dominates in terms of welfare, amount of innovation and output growth at intermediate stages of technological development - periods when legal change is needed. The rigid system is preferable at early stages of technological development, when (lack of) commitment problems are severe. For mature technologies the two legal systems are equivalent. We find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 54 (2013)
Issue (Month): (08)
Pages: 937-956

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Handle: RePEc:wly:iecrev:v:54:y:2013:i::p:937-956

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  1. Beck, T.H.L. & Demirgüç-Kunt , A. & Levine, R., 2003. "Law and finance: Why does legal origin matter?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125511, Tilburg University.
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Cited by:
  1. Giovanni Immordino & Michele Polo, 2012. "Antitrust in Innovative Industries: the Optimal Legal Standards," Working Papers 434, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Massenot, Baptiste, 2010. "Financial development in adversarial and inquisitorial legal systems," MPRA Paper 27098, University Library of Munich, Germany.
  3. Massenot, Baptiste, 2010. "Contract enforcement, litigation, and economic development," MPRA Paper 27501, University Library of Munich, Germany.

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