Business Formation and Aggregate Investment
AbstractThe paper proposes an intertemporal equilibrium model with monopolistic competition and free entry to explain the nexus between business formation and medium run growth. An investment externality is identified that results in underaccumulation of capital in the decentralized market equilibrium and, thus, creates an investment multiplier. Some form of investment promotion is called for. The paper compares the effectiveness of policies to promote business formation with a general investment subsidy.
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Bibliographic InfoPaper provided by Institute for Advanced Studies in its series Economics Series with number 5.
Length: 24 pages
Date of creation: Mar 1995
Date of revision:
Postal: Institute for Advanced Studies - Library, Stumpergasse 56, A-1060 Vienna, Austria
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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