Effectiveness versus Efficiency: Growth-Accelerating Policies in a Model of Growth without Scale Effects

Büttner Bettina
Additional contact information
Büttner Bettina: Otto-von-Guericke Universität Magdeburg,Magdeburg, Germany

German Economic Review, 2006, vol. 7, issue 3, 297-316

Abstract: Recent R&D growth models without strong scale effects imply that long-run growth rates depend only on parameters that are usually taken to be exogenous. However, integrating human capital accumulation into models of this type, Arnold (2002) demonstrates that subsidizing education accelerates growth. The present paper addresses welfare issues in Arnold’s model. The main theoretical finding of the paper is that a system of subsidies that implements the optimal balanced growth path as a decentralized equilibrium includes zero subsidies to education, while R&D activity should be either subsidized or taxed. To shed further light on the latter result, the model is calibrated and it turns out that along the balanced growth path, the decentralized economy underinvests in R&D, i.e. R&D activities should be subsidized.

Keywords: Endogenous growth; scale effects; welfare (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/j.1468-0475.2006.00157.x (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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: https://EconPapers.repec.org/RePEc:bpj:germec:v:7:y:2006:i:3:p:297-316

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ger/html

DOI: 10.1111/j.1468-0475.2006.00157.x

Access Statistics for this article

German Economic Review is currently edited by Peter Egger, Almut Balleer, Jesus Crespo-Cuaresma, Mario Larch, Aderonke Osikominu and Georg Wamser

More articles in German Economic Review from De Gruyter
Bibliographic data for series maintained by Peter Golla ().