Many papers have documented wide variations in productivity even in narrowly defined industries. Some have argued that this primarily reflects measurement problems due to, for example, comparing across different products. Others argue this reflects persistent differences in performance due, for...

This paper investigates the relationship between product market competition and innovation. It uses the radical policy reforms in the UK as instruments for changes in product market competition, and finds a robust inverted-U relationship between competition and patenting. It then develops an...