Public Choice

, Volume 136, Issue 1–2, pp 39–54

How to make a dis-entrepreneur of the Schumpeterian entrepreneur: the impact of institutional settings on growth

Article

Abstract

Fiscal and monetary institutions are conspicuously omitted in the conventional theory of long-run economic growth. Moving from the Schumpeterian entrepreneur, who adopts new technology because its value, according to Tobin’s q, dominates the economic rents of existing capital, we argue that the Schumpeterian entrepreneur’s incentives to innovate change when he is transplanted into the public economy. We analyze two alternative institutional settings denoted as “long chain” and “short chain”. Through the “long chain” model we show that the Schumpeterian entrepreneur is driven towards “destructive creation” of new capital, thus becoming a political dis-entrepreneur, while the quasi-contractual “short chain” model provides incentives to innovate.

Keywords

Creative destruction Economic growth Institutions Tobin’s q 

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Copyright information

© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  1. 1.Department of Public EconomicsSapienza University of RomeRomeItaly
  2. 2.School of EconomicsUniversity of WollongongWollongongAustralia

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