This paper investigates to which extent tough competition impacts on the macroeconomic performance of countries. The relation between competition and innovation has been investigated intensely in industrial economics. It started with Schumpeter's hypothesis that monopoly profits were necessary...

Over the course of the 1990s, the US outperformed Europe not only in output growth, but also in productivity and employment generation, thereby stopping Europe's decade-long period of catching up. The author shows that the growth difference originates at least partly from insufficient investment...