The Importance of Industrial Policy in Quality-Ladder Growth Models

Paolo E. Giordani and Luca Zamparelli ()

The B.E. Journal of Macroeconomics, 2008, vol. 8, issue 1

Abstract: We extend the class of quality-ladder growth models (Grossman and Helpman, 1991, Segerstrom, 1998 and others), to encompass an economy with asymmetric fundamentals. In contrast to the standard framework, in our model industries may differ in terms of their innovative potential (quality jumps and arrival rates) and consumers' preferences. This extension allows us to bring industrial policy back into the realm of the growth policy debate. We first show that it is always possible to raise the long-run growth rate and the social welfare of the economy through a costless tax/subsidy scheme reallocating resources towards the relatively more promising industries. We then prove that, in certain economies, even a mere profit taxation policy increases economic growth and social welfare above the laissez-faire.

Keywords: innovation-driven growth; asymmetric fundamentals; industrial policy (search for similar items in EconPapers)
Date: 2008
View citations in EconPapers

Downloads: (external link)
http://www.bepress.com/cgi/viewcontent.cgi?article=1379&context=bejm (application/pdf)

Related works:
Working Paper: The Importance of Industrial Policy in Quality-Ladder Growth Models (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejmac:v:8:y:2008:i:1:n:1

Access Statistics for this article

More articles in The B.E. Journal of Macroeconomics from Berkeley Electronic Press
Series data maintained by Avi Warner ().