Corporate Governance and Phases of Development

57 Pages Posted: 16 Nov 2018

See all articles by Maurizio Iacopetta

Maurizio Iacopetta

SKEMA Business School

Pietro F. Peretto

Duke University - Department of Economics; Duke Innovation & Entrepreneurship Initiative

Date Written: November 8, 2018

Abstract

Corporate governance distortions delay or even halt a country’s transformation into a modern innovation economy. We investigate the mechanism through a growth model that allows for agency issues within firms. Governance distortions raise the cost of investment and depress the incentives to set up new firms. Modest differences in governance account for large gaps in income: A 32 percent investment cost differential explains the secular decline of Latin America income relative to that of the USA, and implies an industrialization delay of a third of a century. We obtain similar results for a large number of countries and macro-regions.

Keywords: Corporate Governance; Income Differences; Secular Transition; Modern Growth

JEL Classification: D58; O14; O16; O43; O57

Suggested Citation

Iacopetta, Maurizio and Peretto, Pietro F., Corporate Governance and Phases of Development (November 8, 2018). Economic Research Initiatives at Duke (ERID) Working Paper No. 279, Available at SSRN: https://ssrn.com/abstract=3285324 or http://dx.doi.org/10.2139/ssrn.3285324

Maurizio Iacopetta

SKEMA Business School ( email )

Lille
France

Pietro F. Peretto (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1807 (Phone)
919-684-8974 (Fax)

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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