Growth and Welfare Effects of Stabilizing Innovation Cycles
AbstractWe consider a simple model of innovation where equilibrium cycles may arise and show that, whenever actual capital accumulation falls below its balanced growth path, subsidizing innovators by taxing consumers has stabilizing effects, promotes sustained growth and increases welfare. Further, if the steady state is unstable under laissez faire, the introduction of the subsidy can make the steady state stable. Such a policy has beneficial effects as it fosters output growth along the transitional adjustment path, and increases the welfare of current and future generations.
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Bibliographic InfoPaper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Working Paper Series with number 200705.
Date of creation: 15 Jan 2007
Date of revision:
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Growth; endogenous cycles; stabilization; innovation; subsidy; welfare.;
Other versions of this item:
- Aloi, Marta & Lasselle, Laurence, 2007. "Growth and welfare effects of stabilizing innovation cycles," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 806-823, December.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-03 (All new papers)
- NEP-BEC-2007-02-03 (Business Economics)
- NEP-DGE-2007-02-03 (Dynamic General Equilibrium)
- NEP-MAC-2007-02-03 (Macroeconomics)
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