DP5840 Competition, Innovation and Growth with Limited Commitment
|Author(s):||Ramon Marimon, Vincenzo Quadrini|
|Publication Date:||September 2006|
|Keyword(s):||contract enforcement, economic growth, human capital|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5840|
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.