Discussion Paper Details

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Title: Competition, Innovation and Growth with Limited Commitment

Author(s): Ramon Marimon and Vincenzo Quadrini

Publication Date: September 2006

Keyword(s): contract enforcement, economic growth and human capital

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Marimon, R and Quadrini, V. 2006. 'Competition, Innovation and Growth with Limited Commitment'. London, Centre for Economic Policy Research.