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Competition, Innovation and Sustainable Growth

Description: Economic growth theory typically predicts a negative effect of competition on innovation and growth since it reduces the monopoly rents that reward successful innovation. Empirical studies, however, have found conflicting evidence. In technologically advanced OECD countries, competition leads to more innovation and growth but in technologically weaker ones, it can discourage innovation and reduce growth. How can we reconcile theory and evidence? The panelists will present the theory and empirics as well as examples from a middle and low income country to discuss how competition policy can affect innovation and growth in developing countries. Whether one-size-fits-all or the options for policy makers depend upon country circumstances will be highlighted. This session will debate the following questions: Competition affects innovation and growth depending on whether a country is a technological leader or laggard. What are the policy options for countries that are technological laggards and want to catch up? What are some of the incentives that policymakers can offer to innovative Brazilian firms to catch up with East Asia without undermining domestic competition? Why has Tanzania's competition law been more successful in attracting innovative foreign firms to its fishery or floricultural sectors? Does the government offer them special incentives? and What are the key elements of competition policy that are necessary for successful innovation?

Last updated: 2008-08-27

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