Schumpeterian Growth with Productive Public Spending and Distortionary Taxation

  title={Schumpeterian Growth with Productive Public Spending and Distortionary Taxation},
  author={Pietro F. Peretto},
The latest version of Schumpeterian growth theory eliminates the scale effect by positing a process of development of new product lines that fragments the aggregate market in submarkets whose size does not increase with population. A key feature of this process is the sterilization of the effect of the size of the aggregate market on firms’ incentives to invest in the growth of a given product line. In this paper I apply this insight to shed new light on the workings of fiscal policy. I analyze… CONTINUE READING


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