IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Legal Institutions, Innovation and Growth

We build a stylized model of endogenous technological change and analyze the relationship between legal institutions, innovation and growth. Two legal systems are analyzed: a rigid system, where an uncontingent law is written ex ante (before knowing the current technology) and a flexible system where law-makers select the law ex post (after observing the current technology). We show that flexible legal systems dominate in terms of welfare, amount of innovation and output growth in economies at intermediate stages of technological development -- which are periods when legal change is more needed -- while rigid legal systems are preferable at early stages of technological development, when commitment problems are more severe. For mature technologies the two legal systems are shown to be equivalent. Surprisingly, we find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

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:
Download Restriction: no

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 256.

in new window

Date of creation: 03 Jul 2010
Date of revision:
Publication status: Published in International Economic Review, 2013, 54, pp. 937-956
Handle: RePEc:sef:csefwp:256
Contact details of provider: Postal: I-80126 Napoli
Phone: +39 081 - 675372
Fax: +39 081 - 675372
Web page:

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. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
  2. Diego Comin & Bart Hobijn, 2005. "Lobbies and Technology Diffusion," NBER Working Papers 11022, National Bureau of Economic Research, Inc.
  3. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  4. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, 03.
  5. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2002. "Law and finance : why does legal origin matter?," Policy Research Working Paper Series 2904, The World Bank.
  6. La Porta, Rafael & Lopez-de-Silanes, Florencio & Pop-Eleches, Cristian & Shleifer, Andrei, 2004. "Judicial Checks and Balances," Scholarly Articles 3451311, Harvard University Department of Economics.
  7. Giovanni Immordino & Marco Pagano & Michele Polo, 2009. "Incentives to Innovate and Social Harm:Laissez-Faire, Authorization or Penalties?," Working Papers 349, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
  9. Chung, Tai-Yeong, 1995. "On Strategic Commitment: Contracting versus Investment," American Economic Review, American Economic Association, vol. 85(2), pages 437-41, May.
  10. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. B. Zorina Khan & Kenneth L. Sokoloff, 2001. "The Early Development of Intellectual Property Institutions in the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 233-246, Summer.
  12. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
  13. Luca Anderlini & Leonardo Felli & Alessandro Riboni, 2014. "Why Stare Decisis?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 726-738, October.
  14. Comin, D. & Hobijn, B., 2004. "Cross-country technology adoption: making the theories face the facts," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 39-83, January.
  15. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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:sef:csefwp:256. 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: (Lia Ambrosio)

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.