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The Effects of Subsidies in a Research-Driven Endogenous Growth Model

Author

Listed:
  • Michael Frenkel

    (Georgetown University)

  • Thomas Trauth

    (University of Mainz Germany)

Abstract

This paper focuses on the allocation and growth effects of different types of subsidies aimed at rectifying the two distortions that occur in research-driven growth models of the Romer (1990) type. These distortions lead to a suboptimal growth rate and are caused by the monopolistic structure of the capital goods market and the public good character of knowledge which is created as a by-product of R&D and induces positive intertemporal externalities. We show that the effects depend heavily on the design of the subsidies, implying different policy mix possibilities to achieve the optimal output level and growth rate.

Suggested Citation

  • Michael Frenkel & Thomas Trauth, 1996. "The Effects of Subsidies in a Research-Driven Endogenous Growth Model," Development and Comp Systems 9607001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpdc:9607001
    Note: Type of Document - WordPerfect ; prepared on IBM PC ; to print on HP ; pages: 14 ; figures: included .
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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    Keywords

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    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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