Legal Institutions, Innovation and Growth

Luca Anderlini, Leonardo Felli, Giovanni Immordino and Alessandro Riboni

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We build a stylized model of endogenous technological change and analyze the relationship between legal institutions, innovation and growth. Two legal systems are analyzed: a rigid system, where an uncontingent law is written ex ante (before knowing the current technology) and a flexible system where law-makers select the law ex post (after observing the current technology). We show that flexible legal systems dominate in terms of welfare, amount of innovation and output growth in economies at intermediate stages of technological development -- which are periods when legal change is more needed -- while rigid legal systems are preferable at early stages of technological development, when commitment problems are more severe. For mature technologies the two legal systems are shown to be equivalent. Surprisingly, we find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

Keywords: Commitment; Flexibility; Innovation and Growth (search for similar items in EconPapers)
JEL-codes: E61 L51 O3 O43 (search for similar items in EconPapers)
Date: 2010-07-03
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~ and nep-mic
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Citations: View citations in EconPapers (2)

Published in International Economic Review, 2013, 54, pp. 937-956

Downloads: (external link)
http://www.csef.it/WP/wp256.pdf (application/pdf)

Related works:
Journal Article: LEGAL INSTITUTIONS, INNOVATION, AND GROWTH (2013)
Working Paper: Legal Institutions, Innovation and Growth (2011)
Working Paper: Legal Institutions, Innovation and Growth (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:256

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