Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
956970 | Journal of Economic Theory | 2011 | 33 Pages |
Abstract
We develop a dynamic model with two-sided limited commitment to study how barriers to competition, such as restrictions to business start-up and non-competitive covenants, affect the incentive to accumulate human capital. When contracts are not enforceable, high barriers lower the outside value of ‘skilled workers’ and reduce the incentive to accumulate human capital. In contrast, low barriers can result in over-accumulation of human capital. This can be socially optimal if there are positive spillovers. A calibration exercise shows that this mechanism can account for a sizable portion of cross-country income inequality.
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Ramon Marimon, Vincenzo Quadrini,