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Legal Institutions, Innovation and Growth

Author

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  • Anderlini, Luca
  • Felli, Leonardo
  • Immordino, Giovanni
  • Riboni, Alessandro

Abstract

We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a flexible one (law set after observing current technology). The flexible system dominates in terms of welfare, amount of innovation and output growth at intermediate stages of technological development — periods when legal change is needed. The rigid system is preferable at early stages of technological development, when (lack of) commitment problems are severe. For mature technologies the two legal systems are equivalent. We find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

Suggested Citation

  • Anderlini, Luca & Felli, Leonardo & Immordino, Giovanni & Riboni, Alessandro, 2011. "Legal Institutions, Innovation and Growth," CEPR Discussion Papers 8433, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8433
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Immordino, Giovanni & Polo, Michele, 2014. "Antitrust, legal standards and investment," International Review of Law and Economics, Elsevier, vol. 40(C), pages 36-50.
    2. Stephen Oluwatobi & Uchenna Efobi & Isaiah Olurinola & Philip Alege, 2015. "Innovation in Africa: Why Institutions Matter," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 390-410, September.
    3. Edo Mahendra & Ubaidillah Zuhdi & Ratnawati Muyanto, 2015. "Determinants of Firm Innovation in Indonesia: The Role of Institutions and Access to Finance," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 61, pages 149-179, December.
    4. Giovanni Immordino & Michele Polo, 2012. "Antitrust in Innovative Industries: the Optimal Legal Standards," Working Papers 434, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Massenot Baptiste, 2010. "Contract Enforcement, Litigation, and Economic Development," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 10.14, Université de Lausanne, Faculté des HEC, DEEP.
    6. Massenot, Baptiste, 2011. "Financial development in adversarial and inquisitorial legal systems," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 602-608.
    7. Furukawa, Yuichi & Lai, Tat-kei & Sato, Kenji, 2017. "Receptivity and Innovation," MPRA Paper 81536, University Library of Munich, Germany.

    More about this item

    Keywords

    Commitment; Flexibility; Growth; Innovation; Legal System;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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