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Impact of R&D Investment on Economic Growth of the Czech Republic - A Recursively Dynamic CGE Approach

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  • Zuzana Křístková
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    Abstract

    The paper investigates how results obtained with standard CGE models can be improved by incorporating the effects of R&D activity in a recursively-dynamic CGE model built for the economy of the Czech Republic. The main objective of the paper is to quantify the impact of R&D activity on the long-term economic growth of the Czech Republic within the recursively dynamic CGE framework. The effect of R&D investment is modelled via the accumulation of knowledge that is treated as a specific production factor. The main findings show that knowledge accumulation can contribute to higher economic growth, but the impact of the dynamisation in the CGE model is very low. However, in terms of structural changes in the economy, the omission of knowledge capitalization might underestimate the tertiary sector in the longer run. The paper also investigates the efficiency of R&D investment and concludes that in the longer run, investment in capital goods is more efficient in achieving higher economic growth. In the concluding chapter, related factors that may improve the impact of knowledge in the CGE model are discussed.

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    Bibliographic Info

    Article provided by University of Economics, Prague in its journal Prague Economic Papers.

    Volume (Year): 2012 (2012)
    Issue (Month): 4 ()
    Pages: 412-433

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    Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:4:id:432:p:412-433

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    Related research

    Keywords: structural change; R&D investment; knowledge accumulation; economic growth; Czech Republic; CGE model;

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    References

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    1. Michal Kejak & Stephan Seiter & David Vavra, 2004. "Accession Trajectories and Convergence: Endogenous Growth Perspective," CERGE-EI Working Papers wp219, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
    2. Kamil Dybczak & David Vonka & Nico van der Windt, 2008. "The Effect of Oil Price Shocks on the Czech Economy," Working Papers 2008/5, Czech National Bank, Research Department.
    3. Xinshen Diao & Terry Roe & Erinç Yeldan, 1998. "Strategic Policies and Growth : An Applied Model of R&D-Driven Endogenous Growth," Departmental Working Papers 981, Bilkent University, Department of Economics.
    4. Gillingham, Kenneth T. & Newell, Richard G. & Pizer, William A., 2007. "Modeling Endogenous Technological Change for Climate Policy Analysis," Discussion Papers dp-07-14, Resources For the Future.
    5. Siddiqi, Yusuf & Salem, Meir, 2006. "A Proposal for Treating Research and Development As Capital Expenditures in the Canadian SNA," Economic Analysis (EA) Research Paper Series 2006040e, Statistics Canada, Analytical Studies Branch.
    6. Wang, Ke & Wang, Can & Chen, Jining, 2009. "Analysis of the economic impact of different Chinese climate policy options based on a CGE model incorporating endogenous technological change," Energy Policy, Elsevier, vol. 37(8), pages 2930-2940, August.
    7. Michal Kejak & David Vavra, 2004. "Factor Accumulation Story: Any Unfinished Business?," CERGE-EI Working Papers wp220, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
    8. G. Garau & P. Lecca, 2008. "Impact Analysis of Regional Knowledge Subsidy: a CGE Approach," Working Paper CRENoS 200811, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    9. Arjan Lejour & Hugo Rojas-Romagosa, 2008. "International spillovers of domestic reforms: the joint application of the Lisbon Strategy in the EU," CPB Discussion Paper 105, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    11. Fernando Galindo-Rueda, 2007. "Developing an R&D satellite account for the UK: a preliminary analysis," Economic and Labour Market Review, Palgrave Macmillan, vol. 1(12), pages 18-29, December.
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