Minniti, A. and Parello, C. and Segerstrom, P. S. (2008): A Schumpeterian Growth Model with Heterogenous Firms.
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A common assumption in the Schumpeterian growth literature is that the innovation size is constant and identical across industries. This is in contrast with the empirical evidence which shows that: (i) the innovation size is far from being identical across industries; and (ii) the size distribution of profit returns from innovation is highly skewed toward the low value side, with a long tail on the high value side. In the present paper, we develop a Schumpeterian growth model that is consistent with this evidence. In particular, we assume that when a firm innovates, the size of its quality improvement is the result of a random draw from a Pareto distribution. This enables us to extend the class of quality-ladder growth models to encompass firm heterogeneity. We study the policy implications of this new set-up numerically and find that it is optimal to heavily subsidize R&D for plausible parameter values. Although it is optimal to tax R&D for some parameter values, this case only occurs when the steady-state rate of economic growth is very low.
|Item Type:||MPRA Paper|
|Original Title:||A Schumpeterian Growth Model with Heterogenous Firms|
|Keywords:||Schumpeterian Growth, R&D, optimal policy|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O38 - Government Policy
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E10 - General
|Depositing User:||Antonio Minniti|
|Date Deposited:||28. Feb 2009 11:57|
|Last Modified:||13. Feb 2013 03:30|
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