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Competition, Innovation and Growth with Limited Commitment

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  • Ramon Marimon
  • Vincenzo Quadrini

Abstract

We study how barriers to competition---such as restrictions to business start-up and strict enforcement of covenants or IPR---affect the investment in knowledge capital when contracts are not enforceable. These barriers lower the competition for human capital and reduce the incentive to accumulate knowledge. We show in a dynamic general equilibrium model that this mechanism has the potential to account for significant cross-country income inequality.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12474.

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Date of creation: Aug 2006
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Handle: RePEc:nbr:nberwo:12474

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  1. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  3. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  4. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  6. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2002. "Distance to Frontier, Selection, and Economic Growth," NBER Working Papers 9066, National Bureau of Economic Research, Inc.
  7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  8. Mariagiovanna Baccara & Ronny Razin, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," Levine's Working Paper Archive 122247000000000194, David K. Levine.
  9. Boyan Jovanovic, 2004. "The Product Cycle and Inequality," NBER Working Papers 10910, National Bureau of Economic Research, Inc.
  10. Cooley, Thomas F & Marimon, Ramon & Quadrini, Vincenzo, 2004. "Aggregate Consequences of Limited Contract Enforceability," CEPR Discussion Papers 4173, C.E.P.R. Discussion Papers.
  11. Albert Marcet & Ramon Marimon, 2011. "Recursive Contracts," Working Papers 552, Barcelona Graduate School of Economics.
  12. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
  13. Kocherlakota, Narayana R, 1996. "Implications of Efficient Risk Sharing without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 63(4), pages 595-609, October.
  14. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
  15. Marcet, Albert & Marimon, Ramon, 1992. "Communication, commitment, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 219-249, December.
  16. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 445-64, July.
  17. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
  18. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, December.
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Cited by:
  1. Messner Matthias & Pavoni Nicola & Sleet Christopher, . "On the Dual Approach to Recursive Optimization," GSIA Working Papers 2012-E12, Carnegie Mellon University, Tepper School of Business.
  2. Hernan Moscoso Boedo & Toshihiko Mukoyama, 2012. "Evaluating the effects of entry regulations and firing costs on international income differences," Journal of Economic Growth, Springer, vol. 17(2), pages 143-170, June.
  3. Simon Commander & Zlatko Nikoloski, 2010. "Institutions and economic performance: What can be explained?," Working Papers 121, European Bank for Reconstruction and Development, Office of the Chief Economist.

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