Subsidies in an R&D growth model with elastic labor

Jinli Zeng () and Jie Zhang ()

No 1206, MRG Discussion Paper Series from School of Economics, University of Queensland, Australia

Abstract: This paper compares different subsidies in an R&D growth model with competitive suppliers of a final good and monopolistic suppliers of intermediate goods. Unlike existing studies with lump-sum taxes and fixed labor, we assume distortionary taxes and elastic labor, finding some new insights. First, subsidizing R&D investment is more effective than subsidizing final output or subsidizing the purchase of intermediate goods in terms of promoting growth. Second, in terms of raising welfare, the R&D subsidy may also be more effective than the other subsidies and all of them are dominated by their mix, but none can achieve the social optimum.

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Related works:
Journal Article: Subsidies in an R&D growth model with elastic labor (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:qld:uqmrg6:12

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