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R&D and Economic Growth in Slovenia: A Dynamic General Equilibrium Approach with Endogenous Growth

  • Miroslav Verbič

    ()

    (Faculty of Economics, University of Ljubljana, Slovenia and Institute for Economic Research, Ljubljana, Slovenia)

  • Boris Majcen

    ()

    (Institute for Economic Research, Ljubljana, Slovenia)

  • Olga Ivanova

    ()

    (TNO Bouw en Ondergrond, Delft, Netherlands)

  • Mitja Čok

    ()

    (Faculty of Economics, University of Ljubljana, Slovenia)

In the article, we model R&D as a major endogenous growth element in a small open economy general equilibrium framework and consider several R&D policy scenarios for Slovenia. Increase of the share of sectoral investment in R&D that is deductible from the corporate income tax and increase of government spending on R&D turned out to be the most effective suggested policy measures. While the former policy measure is still followed in part by an undesired transfer of the tax relief to dividends, a moderate increase of government spending on R&D boosts long-run productivity in the economy, thus increasing the future value of firms, which is reflected in a desired dividend increase. The households that would gain more utility from such policy scenarios are those with more skilled and highly skilled labour, but not the very top earners in the economy.

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Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 58 (2011)
Issue (Month): 1 (March)
Pages: 67-89

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Handle: RePEc:voj:journl:v:58:y:2011:i:1:p:67-89
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