Financial Intermediation in a Model of Growth Through Creative Destruction
نویسنده
چکیده
This paper presents an endogenous growth model in which the research activity is ...nanced by intermediaries that are able to reduce the incidence of researcher’s moral hazard. It is shown that ...nancial activity is growth promoting because it increases research productivity. It is also found that a subsidy to the ...nancial sector may have larger growth e¤ects than a direct subsidy to research. Moreover, due to the presence of moral hazard, increasing the subsidy rate to R&D may reduce the growth rate. I show that there exists a negative relation between the ...nancing of innovation and the process of capital accumulation. Concerning welfare, the presence of two externalities of opposite sign steaming from ...nancial activity may cause that the no-tax equilibrium provides an ine¢cient level of ...nancial services. Thus, policies oriented to balance the e¤ects of the two externalities will be welfare improving. ¤I am deeply indebted to professors Angel de la Fuente and David Pérez-Castrillo for their comments. I also wish to thank my advisor Jordi Caballé for his patience and helpful directions.
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