Subsidies in an Economy with Endogenous Cycles Over Neoclassical Investment and Neo-Schumpeterian Innovation Regimes

Bei Li and Jie Zhang
Additional contact information
Bei Li: Business School, University of Western Australia

No 11-23, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: We explore the roles of subsidies in the Matsuyama model (1999) of growth through cycles alternating perpetually between two phases featuring neoclassical investment and neo-Schumpeterian innovation respectively. Subsidies to R&D investment or to the purchase of newly invented intermediate goods can arbitrarily reduce the threshold level of capital per type of intermediate good, beyond which the economy moves from the investment phase to the innovation phase. More importantly, such subsidies can mitigate and eventually eliminate cycles for ignificant welfare gains that can be equivalent to as much as 10% rises in consumption at all times.

Pages: 48 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.business.uwa.edu.au/__data/assets/pdf_ ... ovations-Regimes.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:11-23

Access Statistics for this paper

More papers in Economics Discussion / Working Papers from The University of Western Australia, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sam Tang ().