An Analysis of the Importance of Both Destruction and Creation to Economic Growth (Updated)

Gregory Huffman

No 19-00006, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: A growth model is studied in which the destruction (or exit) and creative (or research) decisions are decoupled. This approach emphasizes that different agents make these interrelated decisions. The growth rate equals the product of a measure of the destruction and creation rates. The determinants of income mobility, income inequality, the lifespan of a firm, and the growth rate are studied. The equilibrium can either yield too high or low a level of innovation, but the destruction rate may also be too high or low. A non-linear tax/subsidy scheme, which alters the innovation and exit decisions, can improve welfare.

Keywords: Economic Growth; Creative Destruction; Innovation; Firm Exit; Tax Policy; Inequality (search for similar items in EconPapers)
JEL-codes: E00 E62 H23 O10 O30 O40 (search for similar items in EconPapers)
Date: 2019-03-25
New Economics Papers: this item is included in nep-gro and nep-mac
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Citations: View citations in EconPapers (1)

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Working Paper: An Analysis of the Importance of Both Destruction and Creation to Economic Growth (Updated) (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-19-00006

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