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Public Financing of Education and Research in a Model of Endogenous Growth

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  • Alessandra Pelloni

Abstract

We propose a two factor endogenous growth model in which the government intervenes in the economy by financing research and/or education. We allow technology in public production to be different from technology in private production, so that public spending has a direct effect on the rental prices of factors. We characterize both the unique balanced growth path and the transitional dynamics of the model showing the steady state equilibrium to be a saddle point. We also show that while income taxation is distortive, in general, a Pareto optimal outcome can be reached by means of a consumption tax in the decentralized setting.

Suggested Citation

  • Alessandra Pelloni, 1997. "Public Financing of Education and Research in a Model of Endogenous Growth," LABOUR, CEIS, vol. 11(3), pages 517-539, November.
    • Handle: RePEc:bla:labour:v:11:y:1997:i:3:p:517-539
    DOI: 10.1111/1467-9914.00048
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    Cited by:

    1. Gersbach, Hans & Schneider, Maik & Schneller, Olivier, 2010. "Optimal Mix of Applied and Basic Research, Distance to Frontier, and Openness," CEPR Discussion Papers 7795, C.E.P.R. Discussion Papers.
    2. María Morales, 2004. "Research policy and endogenous growth," Spanish Economic Review, Springer;Spanish Economic Association, vol. 6(3), pages 179-209, October.
    3. Lai, Chung-hui, 2013. "(In)determinacy, bargaining, and R&D policies in an economy with endogenous technological change," Economics Discussion Papers 2013-14, Kiel Institute for the World Economy (IfW Kiel).
    4. Pierluigi Murro, 2007. "Public Funding for Basic Research in an Endogenous Growth Model," Rivista di Politica Economica, SIPI Spa, vol. 97(6), pages 203-228, November-.
    5. Cozzi, Guido & Galli, Silvia, 2021. "Privatization of knowledge: Did the U.S. get it right?," Economic Modelling, Elsevier, vol. 98(C), pages 179-191.
    6. Yuhan Zhao & Xuguang Song, 2018. "How Should the Chinese Government Invest R&D Funds: Enterprises or Institutions?," Computational Economics, Springer;Society for Computational Economics, vol. 52(4), pages 1089-1112, December.

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