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Testing a model of UK growth - a causal role for R&D subsidies

Lucy Minford () and David Meenagh
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Lucy Minford: Swansean University, http://www.swansea.ac.uk/staff/som/academic-staff/l.minford/

No E2018/3, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We show that a DSGE model in which subsidies to private sector R&D stimulate economic growth, following the predictions of semi-endogenous growth theory, can account for the joint behaviour of UK output and total factor productivity for 1981-2010. R&D subsidies are measured as government- funded R&D performed by the private sector as a proportion of total private sector R&D. We estimate and test the performance of the model using Indirect Inference, and also investigate the robustness of the results using a Monte Carlo exercise. Our f•ndings indicate that sharp cuts in R&D subsidies tend to have highly persistent growth e¤ects in the UK.

Keywords: R&D; subsidies; economic growth; government policy. (search for similar items in EconPapers)
JEL-codes: E00 O00 O38 O50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-gro, nep-ino, nep-mac and nep-tid
Date: 2018-01
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2018/3

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