The Importance of Industrial Policy in Quality-Ladder Growth Models
AbstractWe extend the class of quality-ladder growth models (Grossman- Helpman (1991), Segerstrom (1998) and others), to encompass an economy with asymmetric fundamentals. In contrast to the standard framework, in our model industries may di¤er 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 �rst 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 pro�t taxation policy increases economic growth and social welfare above the laissez-faire.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 6142.
Date of creation: 2007
Date of revision:
Innovation-Driven Growth; Asymmetric Fundamentals; Industrial Policy;
Other versions of this item:
- Giordani Paolo E & Zamparelli Luca, 2008. "The Importance of Industrial Policy in Quality-Ladder Growth Models," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-30, January.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-15 (All new papers)
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