Excessive Deficits and Research and Development capacity

Oscar Afonso, Rui Alves and Paulo B. Vasconcelos
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Paulo B. Vasconcelos: Universidad de Oporto (Portugal)

EKONOMIAZ. Revista vasca de Economía, 2008, vol. 68, issue 02, 354-367

Abstract: Within the debate that involves the application of a tax discipline in the EMU, some authors have questioned the adequacy of the use of the same tax rules for all the different member states, appealing to a more temporary tax flexibility for the small and less developed countries. For such purposes, this paper develops a model of monetary union between two countries that differ in the degree of economic dimension; the exogenous levels of productivity directly related to the quality of the national institutions; the resources of technological knowledge and in the R+D capacity. The outcome obtained suggest that the appropriateness of including some exemptions to the European system of tax discipline, especially in terms of allocating more resources to R+D activities. Its application would affect the measures taken by the less developed countries, making them converge in a faster way.

Keywords: Stability and Growth Pact; fiscal discipline; innovation; imitation; research and development (search for similar items in EconPapers)
JEL-codes: E62 F43 H6 O3 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ekz:ekonoz:2008216

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