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Public Research Spending in an Endogenous Growth Model

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  • Kunihiko Konishi

    () (Graduate School of Economics, Osaka University)

Abstract

This study constructs a variety expansion growth model with public research spending, in which public researchers raise the productivity of private R&D. We show that the rela- tionship between public research spending and the growth rate follows an inverted U-shape. This is because public research spending increases private R&D productivity, but crowds out labor input to private R&D. It is also shown that the welfare-maximizing level of pub- lic research spending is below the growth-maximizing level. With regards to tax policy, a zero-proffit tax maximizes both growth and welfare. Finally, the study analyzes the stability of the steady state, showing that the equilibrium is indeterminate when the government fs revenue source depends on asset income tax.

Suggested Citation

  • Kunihiko Konishi, 2013. "Public Research Spending in an Endogenous Growth Model," Discussion Papers in Economics and Business 13-26, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:1326
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    References listed on IDEAS

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    More about this item

    Keywords

    Public expenditure; Endogenous growth; Innovation; Indeterminacy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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