Business Formation and Aggregate Investment

Christian Keuschnigg

No 5, Economics Series from Institute for Advanced Studies

Abstract: The paper proposes an intertemporal equilibrium model with monopolistic competition and free entry to explain the nexus between business formation and medium run growth. An investment externality is identified that results in underaccumulation of capital in the decentralized market equilibrium and, thus, creates an investment multiplier. Some form of investment promotion is called for. The paper compares the effectiveness of policies to promote business formation with a general investment subsidy.

Keywords: Monopolistic Competition; Business Formation; Investment Multiplier; Under-Accumulation of Capital (search for similar items in EconPapers)
JEL-codes: E62 H23 L16 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1995-03
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Citations: View citations in EconPapers (1)

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https://irihs.ihs.ac.at/id/eprint/831 First version, 1995 (application/pdf)

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 (1996)
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