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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 business start-up affect the investment in knowledge capital when contracts are not enforceable. Barriers to business start-up lower the competition for knowledge capital and, in absence of commitment, reduce the incentive to accumulate knowledge. As a result, countries with large barriers experience lower income and growth. Our results are consistent with cross-country evidence showing that the cost of business start-up is negatively correlated with the level and growth of income.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 933.

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Date of creation: Dec 2005
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Handle: RePEc:upf:upfgen:933

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Web page: http://www.econ.upf.edu/

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Keywords: Innovation; Knowledge Capital; Enforcement; Growth; Competition; Commitment; Recursive Contracts; Mobility;

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  1. Zilibotti, Fabrizio & Aghion, Philippe & Acemoglu, Daron, 2006. "Distance to Frontier, Selection, and Economic Growth," Scholarly Articles 4554122, Harvard University Department of Economics.
  2. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
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  7. Albert Marcet & Ramon Marimon, 1991. "Communication, commitment and growth," Economics Working Papers 1, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Boyan Jovanovic, 2004. "The Product Cycle and Inequality," NBER Working Papers 10910, National Bureau of Economic Research, Inc.
  9. Cooley, Thomas F & Marimon, Ramon & Quadrini, Vincenzo, 2004. "Aggregate Consequences of Limited Contract Enforceability," CEPR Discussion Papers 4173, C.E.P.R. Discussion Papers.
  10. Albert Marcet & Ramon Marimon, 2011. "Recursive Contracts," Economics Working Papers ECO2011/15, European University Institute.
  11. Boldrin,Michele & Levine,David K., 2008. "Against Intellectual Monopoly," Cambridge Books, Cambridge University Press, number 9780521879286.
  12. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: An Inverted-U Relationship," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 701-728, May.
  13. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. 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.
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  18. 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.
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Cited by:
  1. Hernan J. Moscoso Boedo & Toshihiko Mukoyama, 2011. "Evaluating the Effects of Entry Regulations and Firing Costs on International Income Differences," Virginia Economics Online Papers 379, University of Virginia, Department of Economics.
  2. 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.
  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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