The Importance of Industrial Policy in Quality-Ladder Growth Models
AbstractWe extend the class of quality-ladder growth models (Grossman and Helpman, 1991, Segerstrom, 1998 and others), to encompass an economy with asymmetric fundamentals. In contrast to the standard framework, in our model industries may differ in terms of their innovative potential (quality jumps and arrival rates) and consumers' preferences. This extension allows us to bring industrial policy back into the realm of the growth policy debate. We first show that it is always possible to raise the long-run growth rate and the social welfare of the economy through a costless tax/subsidy scheme reallocating resources towards the relatively more promising industries. We then prove that, in certain economies, even a mere profit taxation policy increases economic growth and social welfare above the laissez-faire.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 8 (2008)
Issue (Month): 1 (January)
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Web page: http://www.degruyter.com
Other versions of this item:
- Giordani, Paolo E. & Zamparelli, Luca, 2007. "The Importance of Industrial Policy in Quality-Ladder Growth Models," MPRA Paper 6142, University Library of Munich, Germany.
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
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