Corporate governance and industrialization

Abstract

Corporate governance distortions delay or even halt a country's transformation into a modern innovation economy. We investigate the mechanism through a growth model that allows for agency issues within firms. Governance distortions raise the cost of investment and depress the incentives to set up new firms. Modest differences in governance account for large gaps in income: A 32 percent investment cost differential can explain the secular decline of Latin America income relative to that of the USA, and implies an industrialization delay of a third of a century. We obtain similar results for a large number of countries and macro-regions.

Export-led takeoff in a Schumpeterian economy

“…where > 0 is now a preference parameter on the per capita consumption of an agricultural good q t . 26 In this case, the asset-accumulation equation becomes 27 _ a t = (r t )a t + w t c t p t t p q;t q t , (…”

Growth and optimal policies in an R&D‐growth model with imperfect international capital mobility

“…Second, for the policy parameters, we follow Impullitti (2010) by setting the initial R&D subsidy rate to be $$\varepsilon =0.188$$. Based on Jaimovich and Floetotto (2008), the range of the estimated markup is within the range of 1.2–1.4; we choose a middle value of $$\mu =1.3$$ as our benchmark, implying a markup of 30% (Iacopetta & Peretto, 2021). Third, the world risk‐free interest rate is set to $$\mathop{r}\limits^{̅}=0.04$$ as used by Schmitt‐Grohé and Uribe (2003).…”

Rent-seeking government and endogenous takeoff in a Schumpeterian economy

“…which is stable given (19). Equations ( 32)-(33) also determine the quality growth rate z t as a function of x t .…”

“…4 This study also considers the transition of an economy from stagnation to growth but in a Schumpeterian model in which the endogenous activations of the invention of new products and the quality improvement of products determine the takeo¤. Therefore, this study contributes to a growing branch of this literature on endogenous takeo¤ in the Schumpeterian growth model developed in Peretto (2015) by considering a rentseeking government; see also Iacopetta and Peretto (2020) on corporate governance, Chu, Fan and Wang (2020) on status-seeking culture, Chu, Kou and Wang (2020) on intellectual property rights, and Chu, Peretto and Wang (2020) on agricultural technology.…”