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Is There Really an Inverted U-shaped Relation Between Competition and R&D?

Listed author(s):
  • Poldahl, Andreas

    ()

    (FIEF)

  • Gustavsson Tingvall, Patrik

    (FIEF)

We test whether predictions of the Aghion and Howitt (2004) model are supported by firm level data. In particular, we analyze if there is an inverted U-shaped relation between competition and R&D. Results show that the inverted U-shaped relation is supported by the Herfindahl index but not by the price cost margin. Using the Herfindahl index results suggest that breaking up monopolies increases R&D while further increases in competition most likely leads to reduced R&D. Comparing different estimators, we find that time-series based estimators typically result in less clear-cut results, probably driven by a lack of time series variation in measures of competition.

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File URL: http://swopec.hhs.se/fiefwp/papers/WP204.pdf
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Paper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 204.

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Length: 25 pages
Date of creation: 27 Feb 2005
Handle: RePEc:hhs:fiefwp:0204
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  1. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
  2. Griliches, Zvi, 1992. " The Search for R&D Spillovers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages 29-47, Supplemen.
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  4. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
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  10. Klette, Tor Jakob, 1999. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 451-476, December.
  11. Tor Jakob Klette & Zvi Griliches, 1992. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Engogenous," NBER Working Papers 4026, National Bureau of Economic Research, Inc.
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  15. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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  17. S. W. Davies & Paul A. Geroski, 2000. "Changes In Concentration, Turbulence, And The Dynamics Of Market Shares," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 383-391, August.
  18. Wolfgang Keller, 1997. "Technology Flows Between Industries: Identification and Productivity Effects," Economic Systems Research, Taylor & Francis Journals, vol. 9(2), pages 213-219.
  19. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
  20. John Scott, 1984. "Firm versus Industry Variability in R&D Intensity," NBER Chapters, in: R&D, Patents, and Productivity, pages 233-248 National Bureau of Economic Research, Inc.
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