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Competition and Performance: The Different Roles of Capital and Labor

In: Input–Output Economics: Theory And Applications Featuring Asian Economies

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  • Thijs ten Raa
  • Pierre Mohnen

Abstract

Neoclassical economists argue that competition promotes efficiency, but Schumpeter argues that it is monopoly rents that help entrepreneurs to invest in R&D. We investigate the overall effect of competition on TFP-growth. We use rent, defined as the factor reward above its perfectly competitive value, as a negative measure of competition. Our main finding is that performance is positively associated with rents on capital, but not with rents on labor. Neoclassical economists and Schumpeter may both be right, but the mechanisms differ.

Suggested Citation

  • Thijs ten Raa & Pierre Mohnen, 2009. "Competition and Performance: The Different Roles of Capital and Labor," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 20, pages 371-388, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812833679_0020
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    1. Thijs Raa, 2005. "Aggregation of Productivity Indices: The Allocative Efficiency Correction," Journal of Productivity Analysis, Springer, vol. 24(2), pages 203-209, October.
    2. Thijs ten Raa & Pierre Mohnen, 2009. "Neoclassical Growth Accounting and Frontier Analysis: A Synthesis," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 19, pages 347-370, World Scientific Publishing Co. Pte. Ltd..
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    6. Pierre Mohnen & Thijs ten Raa, 2009. "A General Equilibrium Analysis of the Evolution of Canadian Service Productivity," World Scientific Book Chapters, in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 21, pages 391-409, World Scientific Publishing Co. Pte. Ltd..
    7. Thijs Raa, 2008. "Debreu’s coefficient of resource utilization, the Solow residual, and TFP: the connection by Leontief preferences," Journal of Productivity Analysis, Springer, vol. 30(3), pages 191-199, December.
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    Citations

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    Cited by:

    1. Fischer, Justina A.V., 2012. "Globalization and Political Trust," Papers 285, World Trade Institute.
    2. Khalid Sekkat, 2009. "Does competition improve productivity in developing countries?," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 12(2), pages 145-162.
    3. Antonio F. Amores & Thijs ten Raa, 2021. "Firm Efficiency, Industry Performance and the Economy: Three-Way Decomposition with an Application to Andalusia," World Scientific Book Chapters, in: Efficiency and Input-Output Analyses Theory and Applications, chapter 5, pages 67-89, World Scientific Publishing Co. Pte. Ltd..
    4. Wang, Vey & Lai, Chung-Hui, 2011. "Franchise fee, competition and economic growth," Economic Modelling, Elsevier, vol. 28(5), pages 2090-2099, September.
    5. Ni, Niannian & Liu, Yulin & Zhou, Hui, 2022. "Financial openness, capital rents and income inequality," European Journal of Political Economy, Elsevier, vol. 71(C).
    6. Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy," Papers 306, World Trade Institute.
    7. Thomas Strobel, 2012. "New evidence on the sources of EU countries’ productivity growth—industry growth differences from R&D and competition," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(3), pages 293-325, August.
    8. Fischer, Justina A.V., 2012. "The choice of domestic policies in a globalized economy: Extended Version," MPRA Paper 37816, University Library of Munich, Germany.

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    More about this item

    Keywords

    Input–Output Analysis; National Accounts; Productivity; Performance; Canadian Economy; Chinese Economy; Indian Economy; Asian Economics;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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