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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 competition---such as restrictions to business start-up and strict enforcement of covenants or IPR---affect the investment in knowledge capital when contracts are not enforceable. These barriers lower the competition for human capital and reduce the incentive to accumulate knowledge. We show in a dynamic general equilibrium model that this mechanism has the potential to account for significant cross-country income inequality.

Suggested Citation

  • Ramon Marimon & Vincenzo Quadrini, 2006. "Competition, Innovation and Growth with Limited Commitment," NBER Working Papers 12474, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12474
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    References listed on IDEAS

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    1. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    3. Thomas Cooley & Ramon Marimon & Vincenzo Quadrini, 2004. "Aggregate Consequences of Limited Contract Enforceability," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 817-847, August.
    4. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
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    6. Boldrin,Michele & Levine,David K., 2010. "Against Intellectual Monopoly," Cambridge Books, Cambridge University Press, number 9780521127264.
    7. Albert Marcet & Ramon Marimon, 1994. "Recursive contracts," Economics Working Papers 337, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 1998.
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    Cited by:

    1. Nicola Pavoni & Christopher Sleet & Matthias Messner, 2014. "The Dual Approach to Recursive Optimization: Theory and Examples," 2014 Meeting Papers 1267, Society for Economic Dynamics.
    2. Messner Matthias & Pavoni Nicola & Sleet Christopher, "undated". "On the Dual Approach to Recursive Optimization," GSIA Working Papers 2012-E12, Carnegie Mellon University, Tepper School of Business.
    3. Commander, Simon & Svejnar, Jan & Tinn, Katrin, 2008. "Explaining the performance of firms and countries: What does the business environment play?," Working Papers 836, Graduate School of Management, St. Petersburg State University.
    4. Hernan Moscoso Boedo & Toshihiko Mukoyama, 2012. "Evaluating the effects of entry regulations and firing costs on international income differences," Journal of Economic Growth, Springer, vol. 17(2), pages 143-170, June.
    5. repec:eee:respol:v:46:y:2017:i:7:p:1272-1283 is not listed on IDEAS
    6. Federico De Francesco, 2010. "Wage Inequality and Entrepreneurship," 2010 Meeting Papers 959, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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