Public deficits and economic growth
AbstractConsidering an integrated area, this paper deals with the balance between the positive effects in the degree of economic cohesion resulting from R&D subsidies, temporarily granted from an imitator and less developed country, and the external negative effects arising from the eventual creation of excessive public deficits. We propose and numerically solve a model of a monetary union between two countries, one being innovator and the other imitator. Results suggest the pertinence of allowing for a temporary differentiation of fiscal discipline rules in favour of the less developed country. R&D subsidies granted by this country seem to lead to an easier catching-up without producing important negative external effects, also as not hurting severely the conditions for long-run sustainability of public accounts.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 26 (2009)
Issue (Month): 5 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411
Economic growth R&D subsidies Economic cohesion Public deficits Numerical computations;
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