Endogenous growth with strategic interactions

Article Abstract:

Endogenous growth models will either underestimate or overestimate the rate of economic growth in an environment where a small number of firms invest strategically in R&D. Two balanced growth paths exist for relatively low discount rates and high levels of human capital, with identical economies meeting in different paths in the long run due to the optimal behavior of firms. These were gleaned in an examination of the relationship between economic growth and strategic R&D allocation between research and manufacturing divisions in an economy with a small number of firms.

Econometrics & Model Building, Industrial research, Econometrics, Business enterprises, Business models

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Investment with uncertain tax policy: does random tax policy discourage investment?

Article Abstract:

The effect of tax policy uncertainty on firm level and aggregate investment is examined. A comparison is made between investment behavior when random discrete jumps in tax policy occur and when uncertainty is due to a shock following Geometric Brownian Motion (GBM). It is shown that capital formation is adversely affected by increases in uncertainty in the GBM model but can be improved in the jump process model.

Tax Law, Public Finance Activities, Economic aspects, Economic policy, Taxation

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