11,990 research outputs found
Competition and growth: reconciling theory and evidence
From book description:
Though competition occupies a prominent place in the history of economic thought, among economists today there is still a limited, and sometimes contradictory, understanding of its impact. In Competition and Growth, Philippe Aghion and Rachel Griffith offer the first serious attempt to provide a unified and coherent account of the effect competition policy and deregulated entry has on economic growth.
The book takes the form of a dialogue between an applied theorist calling on "Schumpeterian growth" models and a microeconometrician employing new techniques to gauge competition and entry. In each chapter, theoretical models are systematically confronted with empirical data, which either invalidates the models or suggests changes in the modeling strategy. Aghion and Griffith note a fundamental divorce between theorists and empiricists who previously worked on these questions. On one hand, existing models in industrial organization or new growth economics all predict a negative effect of competition on innovation and growth: namely, that competition is bad for growth because it reduces the monopoly rents that reward successful innovators. On the other hand, common wisdom and recent empirical studies point to a positive effect of competition on productivity growth. To reconcile theory and evidence, the authors distinguish between pre- and post-innovation rents, and propose that innovation may be a way to escape competition, an idea that they confront with microeconomic data. The book's detailed analysis should aid scholars and policy makers in understanding how the benefits of tougher competition can be achieved while at the same time mitigating the negative effects competition and imitation may have on some sectors or industries
The U-Shaped relationship between vertical integration and competition: theory and evidence
This paper considers how competition can affect aggregate innovative activity through its effects on firms' decision whether or not to vertically integrate. A moderate increase in competition enhances innovation incentives, too much competition discourages innovative effort. These effects generates an inverted-U relationship between competition and innovation and between competition and the incentive to vertically integrate. Preliminary evidence finds that there is a non-linear relationship between competition and the propensity of firms to vertically integrate. These results seem to be more consistent with the Property Right Theory (PRT) of vertical integration than with the Transaction Cost Economics (TCE) approach
Competition and innovation: an inverted U relationship
This paper investigates the relationship between product market competition (PMC) and innovation. A Schumpeterian growth model is developed in which firms innovate âstep-by-stepâ, and where both technological leaders and their followers engage in R&D activities. In this model, competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. This model generates four main predictions which we test empirically. First, the relationship between product market competition (PMC) and innovation is an inverted U-shape: the escape competition effect dominates for low initial levels of competition, whereas the Schumpeterian effect dominates at higher levels of competition. Second, the equilibrium degree of technological âneck-and-necknessâ among firms should decrease with PMC. Third, the higher the average degree of âneck-and-necknessâ in an industry, the steeper the inverted-U relationship between PMC and innovation in that industry. Fourth, firms may innovate more if subject to higher debt-pressure, especially at lower levels of PMC. We confront these four predictions with a new panel data set on UK firmsâ patenting activity at the US patenting office. The inverted U relationship, the neck and neck, and the debt pressure predictions are found to accord well with observed behavior in the data
Competition and innovation: an inverted U relationship?
This paper investigates the relationship between product market competition
and innovation. It uses the radical policy reforms in the UK as instruments
for changes in product market competition, and finds a robust inverted-U relationship
between competition and patenting. It then develops an endogenous
growth model with step-by-step innovation that can deliver this inverted-U pattern.
In this model, competition has an ambiguous effect on innovation. On the
one hand, it discourages laggard firms from innovating, as it reduces their rents
from catching up with the leaders in the same industry. On the other hand,
it encourages neck-and-neck firms to innovate in order to escape competition
with their rival. The inverted-U pattern results from the interplay between
these two effects, together with the effect of competition on the equilibrium
industry structure. The model generates two additional predictions: on the
relationship between competition and the average technological distance between
leaders and followers across industries; and on the relationship between
the distance of an industry to its technological frontier and the steepness of the
inverted-U. Both predictions are supported by the data
The effects of entry on incumbent innovation and productivity
How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries--incumbents in technologically advanced industries react positively to foreign firm entry, but not in laggard industries. To explain this pattern, we introduce entry into a Schumpeterian growth model with multiple sectors which differ by their distance to the technological frontier. We show that technologically advanced entry threat spurs innovation incentives in sectors close to the technological frontier--successful innovation allows incumbents to prevent entry. In laggard sectors it discourages innovation--increased entry threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro-level productivity growth and patent panel data for the UK, and controlling for the endogeneity of entry by exploiting the large number of policy reforms undertaken during the Thatcher era
Entry and productivity growth: evidence from microlevel panel data
How does entry affect productivity growth of incumbents? In this paper we exploit policy reforms in the United Kingdom that changed entry conditions by opening up the U.K. economy during the 1980s and panel data on British establishments to shed light on this question. We show that more entry, measured by a higher share of industry employment in foreign firms, has led to faster total factor productivity growth of domestic incumbent firms and thus to faster aggregate productivity growth
Persistence of Regional Unemployment: Application of a Spatial Filtering Approach to Local Labour Markets in Germany
The geographical distribution and persistence of regional/local unemployment rates in heterogeneous economies (such as Germany) have been, in recent years, the subject of various theoretical and empirical studies. Several researchers have shown an interest in analysing the dynamic adjustment processes of unemployment and the average degree of dependence of the current unemployment rates or gross domestic product from the ones observed in the past. In this paper, we present a new econometric approach to the study of regional unemployment persistence, in order to account for spatial heterogeneity and/or spatial autocorrelation in both the levels and the dynamics of unemployment. First, we propose an econometric procedure suggesting the use of spatial filtering techniques as a substitute for fixed effects in a panel estimation framework. The spatial filter computed here is a proxy for spatially distributed region-specific information (e.g., the endowment of natural resources, or the size of the âhome marketâ) that is usually incorporated in the fixed effects parameters. The advantages of our proposed procedure are that the spatial filter, by incorporating region-specific information that generates spatial autocorrelation, frees up degrees of freedom, simultaneously corrects for time-stable spatial autocorrelation in the residuals, and provides insights about the spatial patterns in regional adjustment processes. We present several experiments in order to investigate the spatial pattern of the heterogeneous autoregressive parameters estimated for unemployment data for German NUTS-3 regions. We find widely heterogeneous but generally high persistence in regional unemployment rates.
Endohedral Impurities in Carbon Nanotubes
A generalization of the Anderson model that includes pseudo-Jahn-Teller
impurity coupling is proposed to describe distortions of an endohedral impurity
in a carbon nanotube. Treating the distortion within mean-field theory,
spontaneous axial symmetry breaking is found when the vibronic coupling
strength g exceeds a critical value g. The effective potential in the
symmetry-broken state is found to have O(2) symmetry, in agreement with
numerical calculations. For metallic zigzag nanotubes endohedrally-doped with
transition metals in the dilute limit, the low-energy properties of the system
may display two-channel Kondo behavior; however, strong vibronic coupling is
seen to exponentially suppress the Kondo energy scale.Comment: 4 pages, 2 figure
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