Growth effect of bubbles in a non-scale endogenous growth model with in-house R&D

Kizuku Takao ()
Additional contact information
Kizuku Takao: Graduate School of Economics, Osaka University

No 14-11, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper provides a theoretical explanation for why the presence of asset bubbles can lead to higher economic growth in concurrence with high consumption by using a simple endogenous growth model. In the model economy, long-lived valuemaximizing firms continuously improve the quality of their specific products through in-house R&D, while at the same time new firms also enter into the market. Due to an absence of intergenerational altruism, asset bubbles can exist as pyramid schemes whose value is not backed by fundamental value. The presence of asset bubbles then leads to higher interest rates. This requires product proliferation to be impeded, which would result in an increase in the demand for differentiated goods at the level of an individual firm. A larger scale of production at the level of an individual firm can encourage in-house R&D of firms and promote economic growth.

Keywords: Bubbles; R&D; Overlapping generations (search for similar items in EconPapers)
JEL-codes: E44 O32 O41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014-02
New Economics Papers: this item is included in nep-dge, nep-gro, nep-ino and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www2.econ.osaka-u.ac.jp/library/global/dp/1411.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1411

Access Statistics for this paper

More papers in Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by The Economic Society of Osaka University ().