A Model Of Creative Destruction With Undiversifiable Risk And Optimising Households  

Oleh:

Waelde, Klaus

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 109 no. 454 (Mar. 1999), page 156-C171.
Fulltext: 156.pdf (199.56KB)

Isi artikel

This paper studies optimal household behaviour in a model of creative destruction. The saving technology is characterised by stochastic returns that follow a Poisson process. It is shown that equilibrium conditions with optimising households differ substantially from equilibrium conditions where investment in R&D is determined by ®rms. Three out of four market failures disappear and a new market failure resulting from a complementarity in ®nancing R&D is identi®ed. Studying the social optimum shows that it contains as the special case of risk neutrality the social optimum derived in the literature.

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