Financial Markets and R&D Investments: a Discrete-Time Model to Interpret Public Policies

Marco Mazzoli

No RP2005-70, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: This paper introduces a discrete-time intertemporal investment model in which the flow of profits affects the risk premium on the cost of finance, and, as a consequence, the rate of discount of future profits. While public investments, according to a consolidated literature, constitute the main bulk of innovation policies, this model is used to comment and interpret the potential use of another, secondary, public policy, consisting of tax incentives for firms performing R&D expenditures and issuing securities in the stock market.

Keywords: Public expenditures; Finance infrastructure; Investments; Public investments (search for similar items in EconPapers)
Date: 2005
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