Business Formation and Aggregate Investment

Christian Keuschnigg

No 1515, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper proposes an intertemporal equilibrium model with monopolistic competition and start-up investment with variable capacity to explain the nexus between business formation and medium-run growth. An investment externality is identified that results in under-accumulation of capital in the decentralized market equilibrium and, thus, creates investment multipliers. Some form of investment promotion is called for. The paper compares the effectiveness of policies to promote small business formation with a general investment tax credit.

Keywords: Business Formation; Monopolistic Competition; Underaccumulation of Captial (search for similar items in EconPapers)
JEL-codes: E62 H23 L16 (search for similar items in EconPapers)
Date: 1996-11
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Related works:
Journal Article: Business Formation and Aggregate Investment (2001)
Journal Article: Business Formation and Aggregate Investment (2001)
Working Paper: Business Formation and Aggregate Investment (1995)
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