This paper investigates the relationship between product market competition and innovation. We find strong evidence of an inverted-U relationship using panel data. We develop a model where competition discourages laggard firms from innovating but encourages neck-and-neck firms to innovate....

A business-cycle model is developed in which output is traded on Lucas-Phelps islands and labo r services on each island are exchanged through costly search and rec ruiting with transactions externalities. The model exhibits persisten t involuntary unemployment and inefficient equilibria, even...

It is shown that, in a class of models with multiple externalities (one positive and one negative), all stationary equilibria may be locally stable to perturbations, in the sense that there exist perfect foresight trajectories leading back to the equil ibrium. Thus, scale diseconomies (arising,...

We introduce imperfect creditor protection in a multicountry Schumpeterian growth model. The theory predicts that any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier, and that all other countries will have a...