Minniti, A. and Parello, C. and Segerstrom, P. S. (2008): A Schumpeterian Growth Model with Heterogenous Firms.
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Abstract
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 |
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Original Title: | A Schumpeterian Growth Model with Heterogenous Firms |
Language: | English |
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, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E10 - General |
Item ID: | 13674 |
Depositing User: | Antonio Minniti |
Date Deposited: | 28 Feb 2009 11:57 |
Last Modified: | 28 Sep 2019 06:30 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/13674 |