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R&D finance and economic growth: a Schumpeterian model with endogenous financial structures

Published online by Cambridge University Press:  28 February 2023

Ming-fu Shaw ,
Juin-jen Chang  and
Ching-chong Lai
Ming-fu Shaw
Affiliation:
Department of Economics, National Chengchi University, Taipei, Taiwan
Juin-jen Chang
Affiliation:
Institute of Economics, Academia Sinica, Taipei, Taiwan
Ching-chong Lai*
Affiliation:
Department of Economics, National Chengchi University, Taipei, Taiwan Institute of Economics, Academia Sinica, Taipei, Taiwan Institute of Economics, National Sun Yat-Sen University, Kaohsiung, Taiwan Department of Economics, National Taipei University, New Taipei City, Taiwan
*
*Corresponding author. Email: cclai@econ.sinica.edu.tw
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Abstract

We endogenize the R&D financial structure and investigate the effects of tax policy (dividend, corporate, and bond income taxes). Agency costs exist between the supply of and demand for funding, which enable the financial market to reshuffle loanable funds out of less productive firms toward others with greater productivity. We show that the financial structure-growth relationship is not monotonic, depending on the relative productivity between the existing and new firms and the allocation of loanable funds between them. The allocation of loanable funds, rather than their market amount, plays a key role in determining the effects of policy.

Keywords

Endogenous financial structuremarket structure-growth relationshipR&D competition between existing and new firms
Type
Articles
Information
Macroeconomic Dynamics , Volume 28 , Issue 2 , March 2024 , pp. 345 - 379
Copyright
© The Author(s), 2023. Published by Cambridge University Press

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