Business Formation and Aggregate Investment
AbstractThe paper proposes an intertemporal equilibrium model with monopolistic competition and start-up investment with variable capacity to explain the nexus between business formation and medium-run growth. An investment externality is identified that results in under-accumulation of capital in the decentralized market equilibrium and, thus, creates investment multipliers. Some form of investment promotion is called for. The paper compares the effectiveness of policies to promote small business formation with a general investment tax credit.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1515.
Date of creation: Nov 1996
Date of revision:
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Other versions of this item:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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