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Financial Markets, Industry Dynamics and Growth

Author

Listed:
  • Maurizio Iacopetta

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Raoul Minetti

    (Michigan State University [East Lansing] - Michigan State University System)

  • Pietro Peretto

    (Duke University [Durham])

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 Peretto, 2019. "Financial Markets, Industry Dynamics and Growth," Post-Print hal-03403582, HAL.
    • Handle: RePEc:hal:journl:hal-03403582
    DOI: 10.1111/ecoj.12635
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03403582
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    Cited by:

    1. Tabata, Ken, 2024. "Redistributive policy and R&D-based growth," Journal of Macroeconomics, Elsevier, vol. 79(C).
    2. 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.
    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 F., 2023. "Innovation and inequality from stagnation to growth," European Economic Review, Elsevier, vol. 160(C).
    5. Maurizio Iacopetta & Raoul Minetti & Pierluigi Murro, 2020. "Growing Through Spinoffs," Working Papers hal-03389197, HAL.
    6. 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).
    7. Iacopetta, Maurizio & Peretto, Pietro F., 2021. "Corporate governance and industrialization," European Economic Review, Elsevier, vol. 135(C).
    8. 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).
    9. Chu, Angus C. & Peretto, Pietro & Xu, Rongxin, 2023. "Export-led takeoff in a Schumpeterian economy," Journal of International Economics, Elsevier, vol. 145(C).
    10. repec:spo:wpmain:info:hdl:2441/2c47q6gpge8vrbqjak551kmu6c is not listed on IDEAS
    11. Maurizio Iacopetta & Raoul Minetti & Pierluigi Murro, 2020. "Growing through Spinoffs. Corporate Governance, Entry, and Innovation," Documents de Travail de l'OFCE 2020-13, Observatoire Francais des Conjonctures Economiques (OFCE).
    12. 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).
    13. Zhou, Yuwen & Tian, Lixin & Yang, Xiaoguang, 2023. "Schumpeterian endogenous growth model under green innovation and its enculturation effect," Energy Economics, Elsevier, vol. 127(PB).
    14. 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.
    15. repec:hal:spmain:info:hdl:2441/2c47q6gpge8vrbqjak551kmu6c is not listed on IDEAS
    16. 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).
    17. Lu Han, 2019. "The Mutable Geography of Firms' International Trade: Evidence and Macroeconomic Implications," Working Papers 201909, University of Liverpool, Department of Economics.
    18. Chu, Angus C. & Peretto, Pietro F. & Wang, Xilin, 2022. "Agricultural revolution and industrialization," Journal of Development Economics, Elsevier, vol. 158(C).
    19. He, Qichun & Wang, Xilin, 2020. "Money, Human Capital and Endogenous Market Structure in a Schumpeterian Economy," MPRA Paper 104609, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial markets; Industry dynamics; Growth;
    All these keywords.

    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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