Business Formation and Aggregate Investment

Keuschnigg, Christian (March 1995) Business Formation and Aggregate Investment. IHS Economics Series 5

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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.;

Item Type: IHS Series
Keywords: 'Monopolistic Competition' 'Business Formation' 'Investment Multiplier' 'Under-Accumulation of Capital'
Classification Codes (e.g. JEL): E62, H23, L16
Status: Published
Date Deposited: 26 Sep 2014 10:36
Last Modified: 04 May 2016 06:45
URI: http://irihs.ihs.ac.at/id/eprint/831

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