How to Promote R&D-based Growth? Public Education Expenditure on Scientists and Engineers versus R&D Subsidies

Volker Grossmann

No 1225, CESifo Working Paper Series from CESifo

Abstract: Empirical evidence suggests that positive externalities from R&D exceed negative ones. According to conventional wisdom, this calls for R&D subsidies. This paper develops a quality-ladder growth model with overlapping generations which evaluates the positive and normative implications of R&D subsidies and compares them with the effects of public education policy to promote R&D. Unlike standard growth models, the proposed framework accounts for the specificity of science and engineering (S&E) skills, where individuals endogenously choose the type of education, and allows for heterogeneity in individual ability. Although intertemporal knowledge spillovers are hypothesized and negative R&D externalities are absent, the analysis shows somewhat surprisingly that R&D subsidies may be detrimental to both productivity growth and welfare, in contrast to publicly provided education targeted to S&E skills. Finally, the optimal structure of public education spending on different skills is examined.

Keywords: education policy; endogenous growth; R&D subsidies; scientists and engineers; skill specificity (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-dev and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: How to promote R&D-based growth? Public education expenditure on scientists and engineers versus R&D subsidies (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1225

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