Competition and performance: the different roles of labor and capital.

T. ten Raa, P. Mohnen

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Neoclassical economists argue that competition promotes efficiency, but schumpeter argues that it is monopoly rents that help entrepreneurs to invest in r&d. We investigate the overall effect of competition on total factor productivity growth (tfp) growth. We use rent, defined as the factor reward above its perfectly competitive value, as a negative measure of competition. Our main finding is that performance is positively associated with rents on capital but not with rents on labor. Neoclassical economists and schumpeter may both be right, but the mechanisms differ.
Original languageEnglish
Pages (from-to)573-584
Number of pages11
JournalJournal of Economic Behavior & Organization
Volume65
Issue number3-4
DOIs
Publication statusPublished - 1 Jan 2008

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