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On optimizing progress in a diversified economy

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  • Franz Gehrels

Abstract

The paper explores how the firm might optimally choose its research and development projects, taking into account both the time path of returns and the discount factor. The dynamic-programming method is used to develop examples and it is shown that under plausible assumptions, the rate of discount has a strong influence on the decision to invest or not. It is argued that static misallocation because of temporary monopoly may be unimportant and that an interest subsidy may be an efficient way to encourage technological progress. Copyright International Atlantic Economic Society 1998

Suggested Citation

  • Franz Gehrels, 1998. "On optimizing progress in a diversified economy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(1), pages 1-7, March.
    • Handle: RePEc:kap:atlecj:v:26:y:1998:i:1:p:1-7
    DOI: 10.1007/BF02298367
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    References listed on IDEAS

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    1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
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