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

Gregory Huffman

No 19-00010, 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; Tax Policy; Inequality (search for similar items in EconPapers)
JEL-codes: E0 O3 (search for similar items in EconPapers)
Date: 2019-07-22
New Economics Papers: this item is included in nep-gro, nep-ino and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: An Analysis of the Importance of Both Destruction and Creation to Economic Growth (2019)
Working Paper: An Analysis of the Importance of Both Destruction and Creation to Economic Growth (2019)
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