Monopolies Life Cycle, Bureaucratization, and Schumpeterian Growth

Thierry Verdier and David Martimort

No 2700, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper analyses the link between the internal organization of firms, their individual life cycle and the whole process of macroeconomic growth. We present a Schumpeterian growth model in which firms face dynamic agency costs. These agency costs are due to the formation of vertical collusions within the organization. To respond to the opportunity of internal collusion, firms go through a whole life cycle, becoming more bureaucratized and less efficient over time. This bureaucratization affects both the intertemporal distribution of profits in a given sector and the distribution of output across sectors. In a general equilibrium model, bureaucratization has two effects: a profitability effect on the return of innovation and a reallocation effect on the skilled labour market. First, we analyse the existence and properties of stationary equilibrium growth. Second, we endogenize the transaction costs of side-contracting and show how the growth rate depends on various organizational parameters of firms.

Keywords: Bureaucratization; Schumpeterian growth; Dynamic collusion; Internal organization of the firm (search for similar items in EconPapers)
JEL-codes: D92 L22 O40 (search for similar items in EconPapers)
Date: 2001-02
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Monopolies Life Cycle, Bureaucratization and Schumpeterian Growth (1999)
Working Paper: Monopolies Life Cycle, Bureaucratization and Schumpeterian Growth (1999)
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