Working Paper: NBER ID: w12474
Authors: 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.
Keywords: competition; innovation; growth; knowledge capital; barriers to entry
JEL Codes: L14; L16; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| barriers to competition (L13) | lower competition for human capital (J24) |
| lower competition for human capital (J24) | reduces incentive to accumulate knowledge capital (D29) |
| competition for knowledge capital (O36) | creates outside value for innovators (O36) |
| creates outside value for innovators (O36) | leverage against investors' attempts to renegotiate payments (G32) |
| degree of competition for knowledge capital (D29) | determinant factor for innovation (O35) |
| lower barriers to entry (L17) | faster economic growth (O49) |