The Equilibrium Allocation of Creative Capital to R&D in a Dynamic Creative Region
RIT Economics Department Working Paper No. 14-04
13 Pages Posted: 26 Apr 2014
There are 2 versions of this paper
The Equilibrium Allocation of Creative Capital to R&D in a Dynamic Creative Region
The Equilibrium Allocation of Creative Capital to R&D in a Dynamic Creative Region
Date Written: April 25, 2014
Abstract
In this note, we analyze a stylized creative region that is populated by members of the creative class. The representative individual in this region possesses a constant relative risk aversion (CRRA) utility function. The existing creative capital is used to produce a final consumption good and to conduct R&D. We first derive the equilibrium level of creative capital that is allocated to the R&D sector. Next, we show how this level is affected by changes in the parameters and in some of the model constants. Finally, we discuss the policy implications of our comparative statics results.
Keywords: Creative Capital, Creative Class, Dynamics, Economic Growth, R&D
JEL Classification: R11, O32
Suggested Citation: Suggested Citation