Business Formation and Aggregate Investment

Christian Keuschnigg

German Economic Review, 2001, vol. 2, issue 1, 31-55

Abstract: The paper proposes an intertemporal equilibrium model of vintage capital and monopolistic competition. Reflecting a tradeoff between the number and capacity of new machines, investment may be extensive or intensive. External gains from specialization and rationalization result in distorted investment decisions. The paper compares the effectiveness of a general investment tax credit with a start‐up subsidy that shifts the direction of investment towards a more extensive form. An optimal policy of investment promotion is derived.

Date: 2001
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https://doi.org/10.1111/1468-0475.00026

Related works:
Journal Article: Business Formation and Aggregate Investment (2001)
Working Paper: Business Formation and Aggregate Investment (1996)
Working Paper: Business Formation and Aggregate Investment (1995)
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German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin

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