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Financial Markets, Industry Dynamics and Growth

Author

Listed:
  • Maurizio Iacopetta
  • Raoul Minetti
  • Pietro F Peretto

Abstract

This article introduces corporate governance frictions into a growth model with endogenous market structure. Managers engage in corporate resource diversion and empire building. Shareholders discipline managers with incentive compensation contracts. A reform that mitigates corporate governance frictions boosts firms’ entry and, for a given market structure, has an ambiguous impact on incumbents’ return to product improvement. However, as the market structure adjusts, becoming more diffuse, incumbents invest less in product improvement. Calibrating the model to U.S. data, we find that a reform of the kind recently enacted in several advanced economies can lead to a welfare loss.

Suggested Citation

  • Maurizio Iacopetta & Raoul Minetti & Pietro F Peretto, 2019. "Financial Markets, Industry Dynamics and Growth," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2192-2215.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:621:p:2192-2215.
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    File URL: http://hdl.handle.net/10.1111/ecoj.12635
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    Cited by:

    1. Chu, Angus C. & Fan, Haichao & Wang, Xilin, 2020. "Status-seeking culture and development of capitalism," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 275-290.
    2. Chu, Angus C. & Kou, Zonglai & Wang, Xilin, 2020. "Dynamic effects of minimum wage on growth and innovation in a Schumpeterian economy," Economics Letters, Elsevier, vol. 188(C).
    3. Zakaria Babutsidze & Maurizio Iacopetta, 2016. "Innovation, growth and financial markets," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 1-24, March.
    4. Chu, Angus C. & Peretto, Pietro & Xu, Rongxin, 2023. "Export-led takeoff in a Schumpeterian economy," Journal of International Economics, Elsevier, vol. 145(C).
    5. Maurizio Iacopetta & Raoul Minetti & Pierluigi Murro, 2020. "Growing Through Spinoffs," Sciences Po Economics Publications (main) hal-03389197, HAL.
    6. Zhou, Yuwen & Tian, Lixin & Yang, Xiaoguang & Wan, Bingyue, 2024. "Robust green Schumpeterian endogenous growth model and spatial Kuznets curve," Energy Economics, Elsevier, vol. 133(C).
    7. Zhou, Yuwen & Tian, Lixin & Yang, Xiaoguang, 2023. "Schumpeterian endogenous growth model under green innovation and its enculturation effect," Energy Economics, Elsevier, vol. 127(PB).
    8. Wang, Di & Wang, Xilin, 2025. "Unions, Growth and Inequality in a Schumpeterian Economy," MPRA Paper 123942, University Library of Munich, Germany.
    9. Angus C. Chu & Yuichi Furukawa & Sushanta Mallick & Pietro Peretto & Xilin Wang, 2021. "Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1429-1465, June.
    10. Chu, Angus C. & Peretto, Pietro F. & Wang, Xilin, 2022. "Agricultural revolution and industrialization," Journal of Development Economics, Elsevier, vol. 158(C).
    11. Iacopetta, Maurizio & Peretto, Pietro F., 2024. "Business taxes, management delegation, and growth," European Economic Review, Elsevier, vol. 170(C).
    12. Iacopetta, Maurizio & Peretto, Pietro F., 2021. "Corporate governance and industrialization," European Economic Review, Elsevier, vol. 135(C).
    13. He, Qichun & Wang, Xilin, 2020. "Money, Human Capital and Endogenous Market Structure in a Schumpeterian Economy," MPRA Paper 104609, University Library of Munich, Germany.
    14. Tabata, Ken, 2024. "Redistributive policy and R&D-based growth," Journal of Macroeconomics, Elsevier, vol. 79(C).
    15. Chu, Angus C. & Peretto, Pietro F., 2023. "Innovation and inequality from stagnation to growth," European Economic Review, Elsevier, vol. 160(C).
    16. repec:spo:wpmain:info:hdl:2441/2c47q6gpge8vrbqjak551kmu6c is not listed on IDEAS
    17. Iacopetta, Maurizio & Minetti, Raoul & Murro, Pierluigi, 2024. "Growing through spinoffs. Corporate governance, entry dynamics, and innovation," Journal of Economic Dynamics and Control, Elsevier, vol. 161(C).
    18. He, Qichun & Wang, Xilin, 2024. "Endogenous human capital and market structure in a monetary Schumpeterian model," Economic Modelling, Elsevier, vol. 141(C).
    19. Lu Han, 2019. "The Mutable Geography of Firms' International Trade: Evidence and Macroeconomic Implications," Working Papers 201909, University of Liverpool, Department of Economics.
    20. Maurizio Iacopetta & Raoul Minetti & Pierluigi Murro, 2020. "Growing through Spinoffs. Corporate Governance, Entry, and Innovation," Working Papers CASMEF 2002, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    21. Chu, Angus C. & Furukawa, Yuichi & Wang, Xilin, 2022. "Rent-seeking government and endogenous takeoff in a Schumpeterian economy," Journal of Macroeconomics, Elsevier, vol. 72(C).
    22. Chu, Angus C. & Furukawa, Yuichi & Peretto, Pietro & Xu, Rongxin, 2024. "Agricultural trade and industrial development," MPRA Paper 122630, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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