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The impact of public goods and services and public R&D on the non-observed economy size, wages inequality and growth

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  • Afonso, Oscar
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    Abstract

    We develop a general equilibrium endogenous growth model in which final goods can be produced either in the Non-Observed Economy (NOE) or in the Official Economy (OE). In particular, by solving transitional dynamics numerically towards the unique and stable steady state, we show that, by affecting the technological-knowledge bias in favour of the OE, productive public goods and services and public policies promoting R&D explain the simultaneous rise in the OE size, the wage premium in favour of OE workers and the economic growth rate. These results are mainly in line with empirical evidence for developed countries, since the 1990s.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 29 (2012)
    Issue (Month): 5 ()
    Pages: 1996-2004

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    Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1996-2004

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Public goods and services; Public R&D policies; Non-observed economy; Technological knowledge; Wages; Economic growth;

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