Discussion paper

DP5840 Competition, Innovation and Growth with Limited Commitment

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.


Marimon, R and V Quadrini (2006), ‘DP5840 Competition, Innovation and Growth with Limited Commitment‘, CEPR Discussion Paper No. 5840. CEPR Press, Paris & London. https://cepr.org/publications/dp5840