 Public Spending in an OLG Economy with Endogenous Technological Change - Financing Matters -Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano Abstract: This paper introduces a government in an overlapping generations economy where long-run growth is the result of purposeful investments in a research sector that creates new technological knowledge. The government provides a subsidy to the re- search sector and pays for its spending by raising taxes and/or issuing debt. A debt- financed research subsidy cannot lead to a higher long-run growth rate than the one obtained in a competitive equilibrium of an otherwise equivalent economy without government. Instead, we show that paying for the subsidy entirely by raising taxes is advantageous from a long-run growth perspective. However, our analysis indicates that neither financing scenario is Pareto-improving as the initially old generation always suffers a welfare loss. Keywords: Productive public spending; Debt issuance; Endogenous technical change; Long-run growth (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2019-08 Access Statistics for this paper More papers in Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano Via Conservatorio 7, I-20122 Milan - Italy. Contact information at EDIRC. |
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