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

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

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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

Batabyal, Amitrajeet A. and Beladi, Hamid, The Equilibrium Allocation of Creative Capital to R&D in a Dynamic Creative Region (April 25, 2014). RIT Economics Department Working Paper No. 14-04, Available at SSRN: https://ssrn.com/abstract=2429391 or http://dx.doi.org/10.2139/ssrn.2429391

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology ( email )

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Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

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