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Mergers, innovation, and inequality

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  • COZZI, Guido
  • TAROLA, Ornella

Abstract

This paper presents a standard endogenous growth framework in which the source of growth is represented by vertical innovation. The crucial assumption we introduce is that there is a positive information gap concerning the discovery of innovation. The aim of reducing the information dissemination lag provides incentives for firms to decide to merge their research efforts. At the same time we find that the skilled/unskilled wage gap is strongly related to this phenomenon. We prove that changing antitrust attitudes toward efficienc-motivated mergers in contestable industries may simultaneously explain observed changes in the industry structure, in qualitative innovation, in wage inequality, and in labor supply composition.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004006.

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Date of creation: 00 Feb 2004
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Handle: RePEc:cor:louvco:2004006

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Related research

Keywords: growth; firm-size; innovation process; antitrust policy;

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References

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  1. Steven G. Allen, 1996. "Technology and the Wage Structure," NBER Working Papers 5534, National Bureau of Economic Research, Inc.
  2. Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
  3. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
  4. Andrade, Gregor & Stafford, Erik, 2004. "Investigating the economic role of mergers," Journal of Corporate Finance, Elsevier, vol. 10(1), pages 1-36, January.
  5. Frank R. Lichtenberg & Donald Siegel, 1991. "The Effects of Leveraged Buyouts on Productivity and Related Aspects of Firm Behavior," NBER Working Papers 3022, National Bureau of Economic Research, Inc.
  6. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  7. Laurie Simon Bagwell & John B. Shoven, 1988. "Share Repurchases and Acquisitions: An Analysis of Which Firms Participate," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 191-220 National Bureau of Economic Research, Inc.
  8. Jovanovic, Boyan & Rob, Rafael, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 569-82, October.
  9. Daron Acemoglu, 1998. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," NBER Working Papers 6658, National Bureau of Economic Research, Inc.
  10. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series 471, Research Institute of Industrial Economics.
  11. Francine D. Blau & Lawrence M. Kahn, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
  12. Cozzi, Guido, 1999. "R&D Cooperation and Growth," Journal of Economic Theory, Elsevier, vol. 86(1), pages 17-49, May.
  13. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
  14. Link, Albert N. & Paton, David & Siegel, Donald S., 2002. "An analysis of policy initiatives to promote strategic research partnerships," Research Policy, Elsevier, vol. 31(8-9), pages 1459-1466, December.
  15. Richard B. Freeman & Morris M. Kleiner, 1990. "Employer behavior in the face of union organizing drives," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(4), pages 351-365, April.
  16. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  17. Carl Shapiro, 2002. "Competition Policy and Innovation," OECD Science, Technology and Industry Working Papers 2002/11, OECD Publishing.
  18. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, May.
  19. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  20. Gort, Michael, 1969. "An Economic Disturbance Theory of Mergers," The Quarterly Journal of Economics, MIT Press, vol. 83(4), pages 624-42, November.
  21. Boyan Jovanovic & Glenn MacDonald, 1994. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
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