A Schumpeterian growth model with random quality improvements

摘要: A common assumption in the Schumpeterian growth literature is that innovation size constant and identical across industries. This contrast with empirical evidence which shows that: (1) not industries (2) distribution of profit returns from highly skewed toward low value side, a long tail on high side. In present paper, we develop model consistent this evidence. particular, assume when firm innovates, its quality improvement result random draw Pareto distribution. enables us to extend class quality-ladder models encompass heterogeneity. We study policy implications new setup numerically find it optimal heavily subsidize R&D for plausible parameter values. Although tax some values, case only occurs steady-state rate economic very low.