Public Research Spending in an Endogenous Growth Model

Kunihiko Konishi ()
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Kunihiko Konishi: Graduate School of Economics, Osaka University

No 13-26, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study constructs a variety expansion growth model with public research spending, in which public researchers raise the productivity of private R&D. We show that the rela- tionship between public research spending and the growth rate follows an inverted U-shape. This is because public research spending increases private R&D productivity, but crowds out labor input to private R&D. It is also shown that the welfare-maximizing level of pub- lic research spending is below the growth-maximizing level. With regards to tax policy, a zero-proffit tax maximizes both growth and welfare. Finally, the study analyzes the stability of the steady state, showing that the equilibrium is indeterminate when the government fs revenue source depends on asset income tax.

Keywords: Public expenditure; Endogenous growth; Innovation; Indeterminacy (search for similar items in EconPapers)
JEL-codes: E62 O41 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013-10
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-ino, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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