Legal Institutions, Innovation and Growth

43 Pages Posted: 15 Jun 2011

See all articles by Luca Anderlini

Luca Anderlini

Georgetown University - Department of Economics

Leonardo Felli

University of Cambridge, Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Giovanni Immordino

University of Salerno - Centre for Studies in Economics and Finance (CSEF)

Alessandro Riboni

Ecole Polytechnique, Paris - Laboratoire d'Econometrie

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Date Written: June 15, 2011

Abstract

We analyze the relationship between legal institutions, innovation and growth. We compare a rigid (law set ex-ante) legal system and a flexible one (law set after observing current technology). The flexible system dominates in terms of welfare, amount of innovation and output growth at intermediate stages of technological development - periods when legal change is needed. The rigid system is preferable at early stages of technological development, when (lack of) commitment problems are severe. For mature technologies the two legal systems are equivalent. We find that rigid legal systems may induce excessive (greater than first-best) R&D investment and output growth.

Keywords: legal system, commitment, flexibility, innovation, growth

JEL Classification: O300, O430, L510, E610

Suggested Citation

Anderlini, Luca and Felli, Leonardo and Immordino, Giovanni and Riboni, Alessandro, Legal Institutions, Innovation and Growth (June 15, 2011). CESifo Working Paper Series No. 3489, Available at SSRN: https://ssrn.com/abstract=1865170

Luca Anderlini

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-6361 (Phone)
202-687-6102 (Fax)

HOME PAGE: http://www.georgetown.edu/faculty/la2/

Leonardo Felli (Contact Author)

University of Cambridge, Faculty of Economics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 335221 (Phone)

HOME PAGE: http://www.felli.info

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Giovanni Immordino

University of Salerno - Centre for Studies in Economics and Finance (CSEF) ( email )

84084 Fisciano, Salerno
Italy

Alessandro Riboni

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

1 rue Descartes
Paris, 75005
France

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