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How to promote R&D-based growth? Public education expenditure on scientists and engineers versus R&D subsidies

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  • Grossmann, Volker

Abstract

Empirical evidence suggests that positive externalities from R&D exceed negative ones. According to conventional wisdom, this calls for R&D subsidies. This paper develops a quality-ladder growth model with overlapping generations which evaluates the positive and normative implications of R&D subsidies and compares them with the effects of public education policy to promote R&D. Unlike standard growth models, the proposed framework accounts for the specificity of science and engineering (S&E) skills, where individuals endogenously choose the type of education, and allows for heterogeneity in individual ability. Although intertemporal knowledge spillovers are hypothesized and negative R&D externalities are absent, the analysis shows somewhat surprisingly that R&D subsidies may be detrimental to both productivity growth and welfare, in contrast to publicly provided education targeted to S&E skills. Finally, the optimal structure of public education spending on different skills is examined.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 29 (2007)
Issue (Month): 4 (December)
Pages: 891-911

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Handle: RePEc:eee:jmacro:v:29:y:2007:i:4:p:891-911

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Web page: http://www.elsevier.com/locate/inca/622617

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References

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  1. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
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  4. de Hek, Paul & Roy, Santanu, 2001. "On Sustained Growth under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 801-13, August.
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  7. Maria J. Alvarez-Pelaez & Christian Groth, 2002. "Too little or too much R&D?," Discussion Papers 02-01, University of Copenhagen. Department of Economics.
  8. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  9. Goolsbee, Austan, 1998. "Does Government R&D Policy Mainly Benefit Scientists and Engineers?," American Economic Review, American Economic Association, vol. 88(2), pages 298-302, May.
  10. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
  11. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  12. André Sapir & Philippe Aghion & Giuseppe Bertola & Martin Hellwig & Jean Pisani-Ferry & Bernard Lange & José Viñals & Helen Wallace & Marco Buti & Mario Nava & Peter Smith, 2004. "An agenda for a growing Europe: the Sapir report," ULB Institutional Repository 2013/8070, ULB -- Universite Libre de Bruxelles.
  13. Paul M. Romer, 2001. "Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 221-252 National Bureau of Economic Research, Inc.
  14. Volker Grossmann, 2003. "Contest for Attention in a Quality-Ladder Model of Endogenous Growth," CESifo Working Paper Series 1003, CESifo Group Munich.
  15. de Hek, Paul A, 1999. "On Endogenous Growth under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 727-44, August.
  16. Glomm, Gerhard & Ravikumar, B., 2003. "Public education and income inequality," European Journal of Political Economy, Elsevier, vol. 19(2), pages 289-300, June.
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Citations

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Cited by:
  1. Grossmann, Volker, 2008. "Entrepreneurial Innovation and Sustained Long-Run Growth without Weak or Strong Scale Effects," IZA Discussion Papers 3389, Institute for the Study of Labor (IZA).
  2. Klaus Prettner, 2012. "Public education, technological change and economic prosperity: semi-endogenous growth revisited," PGDA Working Papers 9012, Program on the Global Demography of Aging.
  3. Prettner, Klaus, 2012. "Public education and economic prosperity: Semi-endogenous growth revisited," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 02/2012, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  4. Mario Coccia, 2012. "What are the effects of public debt on innovation and employment growth?," CERIS Working Paper 201206, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
  5. Katsuhiko Hori & Katsunori Yamada, 2013. "Education, Innovation and Long-Run Growth," The Japanese Economic Review, Japanese Economic Association, vol. 64(3), pages 295-318, 09.
  6. Grossmann, Volker & Steger, Thomas M., 2007. "Growth, Development, and Technological Change," IZA Discussion Papers 2558, Institute for the Study of Labor (IZA).

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