Search

Are more competitive industries more innovative? Empirical investigation into various theories of innovation in industrial organization, agency theory, or endogenous growth, make diverse predictions with respect to this long-standing open question in economics. In this paper, we investigate the empirical relationship between competition intensity and firm innovation using a new micro-database containing a large sample of Canadian manufacturing enterprises over the 2000-05 period. Using three different measures of competition intensity, we find evidence that competition intensity is positively related to firm-level expenditures on research and development (R&D) in Canadian manufacturing industries. However, we also find that this relationship is dampened when more firms are further from the technological frontier of their industry. Nevertheless, the results provide evidence for a Schumpeterian interpretation, whereby market power can increase business incentives for innovation when many firms are technological laggards. [ABSTRACT FROM AUTHOR]

This paper characterizes the general equilibrium foundation of arbitrary partial equilibrium welfare analysis in second-best economies. While prior theory recognizes the importance of market distortions affected by relative price changes, it offers little guidance about the necessary scope of Marshallian partial equilibrium analysis. The paper determines necessary and sufficient conditions for optima of Marshallian total surplus functions to characterize second-best Pareto-optimal allocations. While these conditions confirm much of the traditional approach to applied welfare economics, they bring doubt about its reliability for public policy and concerns over its systematic use to build conventional economic wisdom. [ABSTRACT FROM AUTHOR]

La Loi sur la concurrence est sans contredit l'une des lois les plus sophistiquées d'un point de vue économique jamais mises en vigueur au Canada. Ainsi a-t-on soutenu que l'ultime objectif des dispositions de la Loi sur la concurrence en matière de fusionnement serait de promouvoir l'efficacité éonomique de l'économie canadienne. Cet article élabore une proposition logique basée sur les interprétations juridiques des dispositions de fusionnement de la Loi sur la concurrence selon laquelle l'objectif normatif sous-tendant la loi s'oppose à la redistribution de la richesse causée par un accroissement du pouvoir de marché par rapport à l'allocation économique établie (c.-à-d. le statu quo). Cette analyse positive implique que l'objectif de bien-être social sous-jacent à la loi antitrust canadienne ne concorde pas avec la perspective nsuelle sur le rôle des institutions publiques en matière de politique de la concurrence au Canada. The Competition Act is arguably one of the most economically sophisticated legal statutes ever enacted in Canada. As such, it has been argued that the paramount objective of the merger provisions of the Competition Act should be the promotion of economic efficiency. This paper examines the underlying normative objective of Canadian merger law from a positive perspective by looking at the legal framework established in Canadian jurisprudence. An argument is developed that demonstrates the existence of distributional objections to wealth redistribution caused by an increase in market power with respect to the status quo allocation of economic resources. This social welfare objective is inconsistent with the commonly held view of the functions of competition policy institutions in Canada. [ABSTRACT FROM AUTHOR]

A recent case in Canada has prompted calls to amend that part of the Competition Act which provides an efficiency defence for mergers that would result in a substantial lessening of competition. If a new efficiency defence standard is to be legislated, sound merger policy requires that it be effective and enforceable. An effective standard yields decisions that serve any merger policy objective, thus requiring minimisation of the expected social cost of making Type I and II errors. An enforceable standard yields decisions at reasonable cost to the antitrust authorities and the merging firms. In this welfare economics framework, we argue against adoption of a proposed Consumer Surplus Standard and propose an alternative. [ABSTRACT FROM AUTHOR]