Should the Government Subsidize Innovation or Automation?

Angus Chu, Guido Cozzi, Yuichi Furukawa and Chih-Hsing Liao

MPRA Paper from University Library of Munich, Germany

Abstract: This study introduces automation into a Schumpeterian model to explore the different effects of R&D and automation subsidies. R&D subsidy increases innovation and decreases the share of automated industries with an overall inverted-U effect on economic growth. Automation subsidy decreases innovation and increases the share of automated industries also with an inverted-U effect on growth. Calibrating the model to US data, we find that the current level of R&D (automation) subsidy is above (below) the growth-maximizing level. Simulating transition dynamics, we find that changing R&D (automation) subsidy to its growth-maximizing level causes a welfare gain of 3.8% increase in consumption.

Keywords: automation; innovation; economic growth (search for similar items in EconPapers)
JEL-codes: O3 O4 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-gro, nep-ict, nep-ino, nep-knm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://mpra.ub.uni-muenchen.de/88276/1/MPRA_paper_88276.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/92508/1/MPRA_paper_92508.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/94240/1/MPRA_paper_94240.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/110815/1/MPRA_paper_110815.pdf revised version (application/pdf)

Related works:
Journal Article: Should the government subsidize innovation or automation? (2023)
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