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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.

Suggested Citation

  • Ramon Marimon & Vincenzo Quadrini, 2005. "Competition, Innovation and Growth with Limited Commitment," Working Papers 247, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:247
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    References listed on IDEAS

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    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
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    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    4. Marcet, Albert & Marimon, Ramon, 1992. "Communication, commitment, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 219-249, December.
    5. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
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    Cited by:

    1. Commander, Simon & Nikoloski, Zlatko, 2010. "Institutions and Economic Performance: What Can Be Explained?," IZA Discussion Papers 5247, Institute of Labor Economics (IZA).

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