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Growth and welfare effects of stabilizing innovation cycles

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  • Aloi, Marta
  • Lasselle, Laurence

Abstract

We 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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Suggested Citation

  • Aloi, Marta & Lasselle, Laurence, 2007. "Growth and welfare effects of stabilizing innovation cycles," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 806-823, December.
  • Handle: RePEc:eee:jmacro:v:29:y:2007:i:4:p:806-823
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    References listed on IDEAS

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    Cited by:

    1. Bei Li & Jie Zhang, 2011. "Subsidies in an Economy with Endogenous Cycles Over Neoclassical Investment and Neo-Schumpeterian Innovation Regimes," Economics Discussion / Working Papers 11-23, The University of Western Australia, Department of Economics.
    2. Shinagawa, Shunsuke, 2013. "Endogenous fluctuations with procyclical R&D," Economic Modelling, Elsevier, vol. 30(C), pages 274-280.
    3. repec:eee:jmacro:v:53:y:2017:i:c:p:191-206 is not listed on IDEAS
    4. Dimitrios Varvarigos, 2017. "Endogenous cycles and human capital," Journal of Economics, Springer, vol. 120(1), pages 31-45, January.

    More about this item

    JEL classification:

    • 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, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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