EconPapers    
Economics at your fingertips  
 

A Tax Plan for Endogenous Innovation

Steve Raymond, Lukas Schmid, Anastasios Karantounias () and Mariano Croce
Additional contact information
Steve Raymond: UNC
Lukas Schmid: Duke University
Mariano Croce: University of North Carolina at Chapel H

No 109, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: In times when elevated government debt raises concerns about dimmer global growth prospects, we ask: How can the government provide incentives for innovation in a fiscally sustainable way? We address this question by examining the Ramsey problem of finding optimal tax and subsidy schemes in a model in which growth is endogenously sustained by risky innovation. We characterize the shadow value of growth and entry in the innovation sector. We find that a profit tax is required to replicate the first-best in order to balance the positive spillovers of innovative activity. At the second-best, the profit tax is designed to optimally respond to growth shocks above and beyond what is prescribed by the standard tax-smoothing incentives in economies with exogenous growth. The interplay of risk and innovation opens a new margin for optimal taxation.

New Economics Papers: this item is included in nep-dge, nep-ino, nep-pbe and nep-tid
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://economicdynamics.org/meetpapers/2017/paper_109.pdf (application/pdf)

Related works:
Working Paper: A Tax Plan for Endogenous Innovation (2017) Downloads
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:red:sed017:109

Access Statistics for this paper

More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2019-10-15
Handle: RePEc:red:sed017:109