IMF Working Papers

Competition, Innovation, and Inclusive Growth

ByReda Cherif, Fuad Hasanov

March 19, 2021

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Format: Chicago

Reda Cherif, and Fuad Hasanov. "Competition, Innovation, and Inclusive Growth", IMF Working Papers 2021, 080 (2021), accessed 12/5/2025, https://doi.org/10.5089/9781513574172.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We provide an overview of the theories and empricial evidence on the complex relationship among innovation, competition, and inclusive growth. Competition and innovation-led growth are critical to drive productivity gains and support broad-based growth. However, new technologies and trends in market concentration are stifling future innovation while contributing to the marked increase in inequality. Beyond consumer welfare in a narrow market, competition policy should adapt to this new reality by considering the spillover and dynamic effects of market power, especially on firm entry, innovation, and inequality. Innovation policies should tackle not only government failures but also market failures.

Subject: Competition, Economic growth, Economic sectors, Financial crises, Financial markets, Inclusive growth, Income, Income inequality, National accounts, Production, Productivity

Keywords: Big Tech, competition, competition policy, firm markup, firms enter, frontier firm, growth policy, inclusive growth, Income, Income inequality, Inequality, innovation, innovation policy, laggard firm, market concentration, market power, panel data, Productivity, productivity gain, rise of market power, state intervention, Sub-Saharan Africa, superstar firm

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