Market Failures and Government Failures in the Model of Transition from Stagnation to Growth

Dmitry Veselov

Journal of the New Economic Association, 2011, issue 12, 24-39

Abstract: The paper provides a framework for analysis of optimal growth enhancing policy in the economy with market and government failures. It develops an endogenous growth model with strategic complementarities between R&D investments of firms and investments in training of households. The model generates two possible long-run equilibriums: no-growth poverty trap equilibrium and stable sustainable growth equilibrium. In the extended version of the model with government failures we assume that some part of government revenue is expropriated by rent seeking agents. With these conditions we analyze the possibility of transition from stagnation to growth induced by government investment subsidies and other factors.

Keywords: poverty trap; endogenous growth theory; human capital; rent seeking (search for similar items in EconPapers)
JEL-codes: O11 O33 O41 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2011:i:12:p:24-39

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