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Financial Markets and R&D Investments: a Discrete-Time Model to Interpret Public Policies

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  • Marco Mazzoli

Abstract

This paper introduces a discrete-time intertemporal investment model in which the flow of profits affects the risk premium on the cost of finance, and, as a consequence, the rate of discount of future profits. While public investments, according to a consolidated literature, constitute the main bulk of innovation policies, this model is used to comment and interpret the potential use of another, secondary, public policy, consisting of tax incentives for firms performing R&D expenditures and issuing securities in the stock market.

Suggested Citation

  • Marco Mazzoli, 2005. "Financial Markets and R&D Investments: a Discrete-Time Model to Interpret Public Policies," WIDER Working Paper Series RP2005-70, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2005-70
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    References listed on IDEAS

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    4. Marcus Miller & Paul Weller & Lei Zhang, 2002. "Moral Hazard and the US Stock Market: Analysing the "Greenspan Put"," Economic Journal, Royal Economic Society, vol. 112(478), pages 171-186, March.
    5. Joao F. Gomes, 2001. "Financing Investment," American Economic Review, American Economic Association, vol. 91(5), pages 1263-1285, December.
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