Endogenous Growth and Research Activity under Private Information

Oscar Valencia ()

No 12169, Borradores de Economia from Banco de la Republica

Abstract: This paper examines an endogenous growth model with occupational choice in which innovators produce ideas. Each innovator has private knowledge of their production costs. Developers offer innovators non-linear contract schemes that affect the number of active innovators and the economic growth rate. Two main results are obtained. First, the equilibrium contract under asymmetric information leads to the selection of highly-talented workers in R&D activities and higher profits for developers. Second, the efficiency-rent extraction tradeoff lowers the economic growth rate with respect to the full information case.

Keywords: Adverse Selection; Innovation; Endogenous Growth. (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Pages: 33
Date: 2014-09-15
New Economics Papers: this item is included in nep-cse, nep-cta, nep-gro, nep-ino and nep-knm
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:012169

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