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Economic Policy in a Model of Endogenous Growth

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  • Christian Ragacs

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

  • Martin Zagler

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

We develop a model of endogenous growth based on the division of labour in order to discuss policy issues. The engine of growth is the worker's incentive to achieve higher income, thereby inducing an increase in the degree of specialisation. The genuine contribution of this paper is that both supply side and demand side policies may stimulate long-run economic growth, and do not only induce level shifts. On the supply side, an increase in productivity of innovative workers, alongside with investment in infrastructure, human capital, and improvements in the market setting may stimulate growth. On the demand side, we find that transfers to innovative workers, a reduction in consumption taxes, an increase of labour income taxation of the specialised workforce, and a redistribution towards specialised workers will foster economic growth.

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Bibliographic Info

Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp053.

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Date of creation: Sep 1997
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Handle: RePEc:wiw:wiwwuw:wuwp053

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Related research

Keywords: Economic Growth; Division of Labour; Growth Policy;

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Cited by:
  1. Aleksandra Riedl & Silvia Rocha-Akis, 2007. "Testing the tax competition theory: How elastic are national tax bases in western Europe?," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp112, Vienna University of Economics, Department of Economics.
  2. Gerlinde Fellner & Matthias Sutter, 2008. "Causes, consequences, and cures of myopic loss aversion - An experimental investigation," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp116, Vienna University of Economics, Department of Economics.
  3. Theresa Grafeneder-Weissteiner & Klaus Prettner, 2009. "Agglomeration and population ageing in a two region model of exogenous growth," Working Papers, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna 0901, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  4. Engelbert Stockhammer & Paul Ramskogler, 2007. "Uncertainty and exploitation in history," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp104, Vienna University of Economics, Department of Economics.
  5. Engelbert Stockhammer & Paul Ramskogler, 2008. "Post Keynesian economics - how to move forward," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp124, Vienna University of Economics, Department of Economics.
  6. Özlem Onaran, 2007. "International financial markets and fragility in the Eastern Europe: "can it happen" here?," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp108, Vienna University of Economics, Department of Economics.
  7. Theresa Grafeneder-Weissteiner, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp132, Vienna University of Economics, Department of Economics.
  8. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2007. "Footloose capital and productive public services," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp111, Vienna University of Economics, Department of Economics.
  9. Annemarie Steidl & Engelbert Stockhammer, 2007. "Coming and leaving. Internal mobility in late Imperial Austria," Department of Economics Working Papers, Vienna University of Economics, Department of Economics wuwp107, Vienna University of Economics, Department of Economics.

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