All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

 
Ashok Kaul, Volker Reinthaler and Marcus Hagedorn
 
''Welfare Analysis in a Schumpeterian Growth Model with Capital''
( 2007, Vol. 15 No.7 )
 
 
In this note we compare the laissez-faire steady-state solution in the Howitt and Aghion (1998) model to the social optimum. The analysis offers several new insights in comparison to the welfare analysis in Aghion and Howitt (1992). We find various new distortions between private and optimal solution. First, a monopoly distortion effect generates too little capital accumulation in the private solution because households' gross return per unit of capital will be lower than in the social optimum due to monopoly power. Second, a cost-benefit gap effect leads to excessive research in the private solution because the planner is interested in the average technology whereas the private researcher is interested in the leading-edge technology. Third, we decompose the well-known intertemporal spillover effect into three subeffects and clarify why the planner does not consider other factors than the interest rate to discount gains from innovation.
 
 
Keywords: Endogenous Growth Model
JEL: O4 - Economic Growth and Aggregate Productivity: General
O3 - Technological Change; Research and Development: General
 
Manuscript Received : Nov 27 2006 Manuscript Accepted : Mar 24 2007

  This abstract has been downloaded 477 times                The Full PDF of this paper has been downloaded 87748 times