IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Competition and Performance: The Different Roles of Capital and Labor

  • Pierre Mohnen
  • Thijs Ten Raa

Neoclassical 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. Les économistes néoclassiques soutiennent que la concurrence est bonne pour l'efficacité. Mais pour eux la technologie est donnée. Et pourtant, dans le long terme, le progrès technologique est un déterminant majeur du niveau de bien-être. Schumpeter quant à lui soutient le point de vue opposé que les rentes de monopole incitent les entrepreneurs à investir en recherche et développement. Nous allons examiner l'effet global de la concurrence sur la croissance de la productivité. La concurrence est mesurée par l'inverse des rentes. Celles-ci sont définies comme les rémunérations factorielles qui dépassent leurs valeurs marginales en concurrence parfaite. Une analyse entrée-sortie nous permet de calculer les rentes pour les secteurs de l'économie canadienne sur une période de 30 ans et de les décomposer en rentes incombant au travail et au capital. Comme d'autres travaux antérieurs, nous ne trouvons pas d'effet significatif des rentes sur les productivités. Mais nous obtenons le résultat intéressant que les rentes factorielles n'affectent pas la croissance de la productivité dans le même sens. Les rentes sur le capital jouent favorablement sur la productivité tandis que celles sur le travail pas. À la fois les économistes néoclassiques tout comme les adeptes de Schumpeter ont raison, mais ils font appel à des mécanismes différents. Les rentes qui aident à financer la R-D sont celles sur le capital et celles qui portent au laisser-aller sont celles sur le travail.

If 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.

File URL: http://www.cirano.qc.ca/files/publications/2003s-66.pdf
Download Restriction: no

Paper provided by CIRANO in its series CIRANO Working Papers with number 2003s-66.

as
in new window

Length: 24 pages
Date of creation: 01 Nov 2003
Date of revision:
Handle: RePEc:cir:cirwor:2003s-66
Contact details of provider: Postal: 1130 rue Sherbrooke Ouest, suite 1400, Montréal, Quéc, H3A 2M8
Phone: (514) 985-4000
Fax: (514) 985-4039
Web page: http://www.cirano.qc.ca/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Mohnen, P. & Ten Raa, T., 2000. "A general equilibrium analysis of the evolution of Canadian service productivity," Other publications TiSEM aae1ef0b-8460-49d3-bb4e-8, Tilburg University, School of Economics and Management.
  2. 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.
  3. Stephen Nickell, 1993. "Competition and Corporate Performance," CEP Discussion Papers dp0182, Centre for Economic Performance, LSE.
  4. Ten Raa, T. & Mohnen, P., 2000. "Neoclassical Growth Accounting and Frontier Analysis : A Synthesis," Discussion Paper 2000-67, Tilburg University, Center for Economic Research.
  5. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
  6. 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.
  7. 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 & Francis Journals, vol. 18(3), pages 221-255.
  8. Ten Raa, T., 2005. "Aggregation of productivity indices : The allocative efficiency correction," Other publications TiSEM 0c775438-4bfa-44bd-8111-2, Tilburg University, School of Economics and Management.
  9. Ten Raa, T., 2004. "Aggregation of Productivity Indices : The Allocative Efficiency Correction," Discussion Paper 2004-62, Tilburg University, Center for Economic Research.
  10. Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
  11. Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 467-92, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2003s-66. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.