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Business Formation and Aggregate Investment

Author

Listed:
  • Keuschnigg, Christian

    (Department of Economics, Fisher Hall, Princeton University and Institute for Advanced Studies, Vienna)

Abstract

The 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.

Suggested Citation

  • Keuschnigg, Christian, 1995. "Business Formation and Aggregate Investment," Economics Series 5, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:5
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    File URL: https://irihs.ihs.ac.at/id/eprint/831
    File Function: First version, 1995
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    Citations

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    Cited by:

    1. Vesa Kanniainen & Seppo Kari & Jouko Ylä-Liedenpohja, 2005. "The Start-Up and Growth Stages in Enterprise Formation: The “New View” of Dividend Taxation Reconsidered," CESifo Working Paper Series 1476, CESifo.
    2. Martin D. Dietz, 2004. "Dividend and Capital Gains Taxation in a Cross-Section of Firms," Public Economics 0405004, University Library of Munich, Germany.
    3. Martin D. Dietz & Christian Keuschnigg, 2004. "Corporate Income Tax Reform in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(IV), pages 483-519, December.
    4. Keuschnigg, Christian & Kohler, Wilhelm, 1996. "Commercial policy and dynamic adjustment under monopolistic competition," Journal of International Economics, Elsevier, vol. 40(3-4), pages 373-409, May.
    5. Vesa Kanniainen & Seppo Kari & Jouko Ylä-Liedenpohja, 2007. "Nordic dual income taxation of entrepreneurs," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(4), pages 407-426, August.

    More about this item

    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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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