Competition, Innovation and Growth with Limited Commitment
NBER Working Paper No. 12474
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.
Document Object Identifier (DOI): 10.3386/w12474
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