[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/red/sed008/685.html
   My bibliography  Save this paper

Information, Selection and Growth

Author

Listed:
  • Gino Gancia

    (CREI, UPF and CEPR))

  • Alessandra Bonfiglioli

    (IAE)

Abstract
We study a dynamic model where growth requires long-term investment, and productivity depends on managerial selection. When ability is not ex-ante observable, managerial selection imposes a cost, as managers facing the risk of being replaced tend to choose a sub-optimally low level of long-term investment. We study how this trade-off between selection and investment evolves with the level of development and the availability of information, and its implications for the design of optimal contractual institutions. Our analysis shows that uncertainty increases investment and growth. Productivity, instead, increases with the dispersion of managerial ability and falls with the variance of idiosyncratic shocks (noise). We then study how the trade-off between selection and investment shapes optimal economic institutions. Rigid contractual institutions sacrificing managerial selection may be optimal when information is very noisy, ability is concentrated, returns to investment are high and agents are patient. This might be the relevant case for developing countries. Finally, we illustrate how policies such as trade and financial openness can affect productivity and growth in a novel way, through their impact on managerial selection and investment.

Suggested Citation

  • Gino Gancia & Alessandra Bonfiglioli, 2008. "Information, Selection and Growth," 2008 Meeting Papers 685, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:685
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2008/paper_685.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Raphael Bergoeing & Norman V. Loayza & Facundo Piguillem, 2016. "The Whole is Greater than the Sum of Its Parts: Complementary Reforms to Address Microeconomic Distortions," The World Bank Economic Review, World Bank, vol. 30(2), pages 268-305.
    2. Patrick Legros & Andrew F. Newman & Eugenio Proto, 2014. "Smithian Growth through Creative Organization," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 796-811, December.
    3. Polterovich, Victor, 2013. "Реформа Ран: Экспертный Анализ: Часть I. Реформа Ран: Проект Минобрнауки [Reform of the Russian Academy of Sciences: An Expert Analysis: Part I. Reform of the Russian Academy of Sciences: a project," MPRA Paper 49291, University Library of Munich, Germany.
    4. Wifo, 2019. "WIFO-Monatsberichte, Heft 12/2019," WIFO Monatsberichte (monthly reports), WIFO, vol. 92(12), December.
    5. Chen, Yu-Fu & Funke, Michael, 2008. "Product market competition, investment and employment-abundant versus job-poor growth: A real options perspective," European Journal of Political Economy, Elsevier, vol. 24(1), pages 218-238, March.
    6. Sapir, Andre & Aghion, Philippe & Bertola, Giuseppe & Hellwig, Martin & Pisani-Ferry, Jean & Rosati, Dariusz & Vinals, Jose & Wallace, Helen, 2004. "An Agenda for a Growing Europe: The Sapir Report," OUP Catalogue, Oxford University Press, number 9780199271498.
    7. Steven Bond‐Smith, 2022. "Discretely innovating: The effect of limited market contestability on innovation and growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(3), pages 301-327, July.
    8. Matthias Firgo & Peter Mayerhofer, 2015. "Wissens-Spillovers und regionale Entwicklung - welche strukturpolitische Ausrichtung optimiert des Wachstum?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 144, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    9. Ullah, Barkat, 2021. "Does innovation explain the performance gap between privatized and private firms?," Journal of Economics and Business, Elsevier, vol. 113(C).
    10. Marattin, Luigi & Marzo, Massimiliano & Zagaglia, Paolo, 2013. "Distortionary tax instruments and implementable monetary policy," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 219-243.
    11. V. Vandenberghe, 2018. "The Contribution of Educated Workers to Firms’ Efficiency Gains: The Key Role of Proximity to the ‘Local’ Frontier," De Economist, Springer, vol. 166(3), pages 259-283, September.
    12. Massimiliano Affinito, 2011. "Convergence clubs, the euro-area rank and the relationship between banking and real convergence," Temi di discussione (Economic working papers) 809, Bank of Italy, Economic Research and International Relations Area.
    13. Slesman, Ly & Baharumshah, Ahmad Zubaidi & Azman-Saini, W.N.W., 2019. "Political institutions and finance-growth nexus in emerging markets and developing countries: A tale of one threshold," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 80-100.
    14. Grace Li Ann Yong & Kong Weng Ho, 2006. "Innovation, Imitation And Entrepreneurship," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 51(02), pages 147-173.
    15. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Camilla Mastromarco & Léopold Simar, 2021. "Latent heterogeneity to evaluate the effect of human capital on world technology frontier," Journal of Productivity Analysis, Springer, vol. 55(2), pages 71-89, April.
    17. Rok Spruk & Mitja Kovac, 2018. "Inefficient Growth," Review of Economics and Institutions, Università di Perugia, vol. 9(2).
    18. Çağatay Bircan & Ralph De Haas, 2020. "The Limits of Lending? Banks and Technology Adoption across Russia," The Review of Financial Studies, Society for Financial Studies, vol. 33(2), pages 536-609.
    19. Henry van der Wiel & Harold Creusen & George van Leeuwen & Eugene Van der Pijll, 2012. "The Dutch Productivity Performance: Cross Your Border and Look Around," Chapters, in: Matilde Mas & Robert Stehrer (ed.), Industrial Productivity in Europe, chapter 14, Edward Elgar Publishing.
    20. Jens J. Krüger, 2020. "Long‐run productivity trends: A global update with a global index," Review of Development Economics, Wiley Blackwell, vol. 24(4), pages 1393-1412, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed008:685. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.