Competition and Performance: The Different Roles of Capital and Labor
AbstractNeoclassical economists argue that competition promotes efficiency. They consider technology as given though. In the long run technological progress is an important determinant of the level of welfare and Schumpeter argued that monopoly rents help entrepreneurs to capture the gains of R&D and hence to invest in it. We investigate the overall effect of competition on performance. Performance is measured by TFP-growth. As a negative measure of competition we use rent. Rent is defined as the excess factor rewards over and above their perfectly competitive values (marginal productivities). Input-output analysis enables us to calculate rent for the Canadian sectors over a thirty-year period and to decompose it in its capital and labor components. In line with the literature we find that rent has no significant influence on productivity. We find an interesting result however: the components influence performance in opposite directions. Capital rent has a positive role and labor rent a negative one. The neoclassical economists and Schumpeter seem both right, but the mechanisms differ. The use of rent as a source of funding for R&D applies to capital and the argument that rent yields slack pertains to labor.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa03p10.
Date of creation: Aug 2003
Date of revision:
Contact details of provider:
Postal: Augasse 2-6, 1090 Vienna, Austria
Web page: http://www.ersa.org
Other versions of this item:
- ten Raa, Thijs & Mohnen, Pierre, 2008. "Competition and performance: The different roles of capital and labor," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 573-584, March.
- Pierre Mohnen & Thijs Ten Raa, 2003. "Competition and Performance: The Different Roles of Capital and Labor," CIRANO Working Papers 2003s-66, CIRANO.
- Mohnen, P. & Raa, T. ten, 2003. "Competition and Performance: The Different Roles of Capital and Labor," Discussion Paper 2003-112, Tilburg University, Center for Economic Research.
- Mohnen,Pierre & Raa,Thijs,ten, 2003. "Competition and Performance: The Different Roles of Capital and Labor," Research Memoranda 034, Maastricht : MERIT, Maastricht Economic Research Institute on Innovation and Technology.
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-COM-2004-02-29 (Industrial Competition)
- NEP-GEO-2004-02-29 (Economic Geography)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nickell, Stephen J, 1996.
"Competition and Corporate Performance,"
Journal of Political Economy,
University of Chicago Press, vol. 104(4), pages 724-46, August.
- Raa, T. ten & Mohnen, P., 2002.
"Neoclassical growth accounting and frontier analysis: A synthesis,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-90106, Tilburg University.
- Thijs Raa & Pierre Mohnen, 2002. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," Journal of Productivity Analysis, Springer, vol. 18(2), pages 111-128, September.
- Raa, T. ten & Mohnen, P., 2000. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," Discussion Paper 2000-67, Tilburg University, Center for Economic Research.
- Mohnen, P. & Raa, T. ten, 2000.
"A general equilibrium analysis of the evolution of Canadian service productivity,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-86157, Tilburg University.
- Mohnen, Pierre & ten Raa, Thijs, 2000. "A general equilibrium analysis of the evolution of Canadian service productivity," Structural Change and Economic Dynamics, Elsevier, vol. 11(4), pages 491-506, December.
- Thijs Raa, 2005. "Aggregation of Productivity Indices: The Allocative Efficiency Correction," Journal of Productivity Analysis, Springer, vol. 24(2), pages 203-209, October.
- Raa, T. ten, 2005. "Aggregation of productivity indices: The allocative efficiency correction," Open Access publications from Tilburg University urn:nbn:nl:ui:12-171684, Tilburg University.
- Surendra Gera & Wulong Gu & Zhengxi Lin, 2001. "Technology and the demand for skills in Canada: an industry-level analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 132-148, February.
- Edward Wolff, 2006. "The growth of information workers in the US economy, 1950-2000: the role of technological change, computerization, and structural change," Economic Systems Research, Taylor and Francis Journals, vol. 18(3), pages 221-255.
- Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
- Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy," MPRA Paper 36990, University Library of Munich, Germany.
- Fischer, Justina AV, 2012.
"Globalization and political trust,"
37763, University Library of Munich, Germany.
- Wang, Vey & Lai, Chung-Hui, 2011. "Franchise fee, competition and economic growth," Economic Modelling, Elsevier, vol. 28(5), pages 2090-2099, September.
- Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy: Extended Version," MPRA Paper 37816, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier).
If references are entirely missing, you can add them using this form.