The Equilibrium Allocation of Creative Capital to R&D in a Dynamic Creative Region

DOI: 10.4236/tel.2014.46054   PDF   HTML     3,299 Downloads   3,999 Views   Citations

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.

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Batabyal, A. and Beladi, H. (2014) The Equilibrium Allocation of Creative Capital to R&D in a Dynamic Creative Region. Theoretical Economics Letters, 4, 425-430. doi: 10.4236/tel.2014.46054.

Conflicts of Interest

The authors declare no conflicts of interest.

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