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Growth and the Smart State

Author

Listed:
  • Philippe Aghion

    (Department of Economics, Harvard University, Cambridge, Massachusetts 02138)

  • Alexandra Roulet

    (Department of Economics, Harvard University, Cambridge, Massachusetts 02138)

Abstract

As countries develop, the main driver of economic growth shifts from imitation to innovation. These two sources of growth require different policies and institutions. In particular, in this article we argue that the transition from an imitation-based to an innovation-based economy calls the old welfare state model into question. It is not so much the size of the state that is at stake but rather its governance. What we need to foster economic growth in developed economies is not a reduced state but a strategic state, which acts as a catalyst using selective and properly governed support to the market-driven innovation process. This idea of a strategic state that targets its investments to maximize growth in the face of hard budget constraints departs both from the Keynesian view of a state sustaining growth through demand-driven policies and from the neoliberal view of a minimal state confined to its regalian functions.

Suggested Citation

  • Philippe Aghion & Alexandra Roulet, 2014. "Growth and the Smart State," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 913-926, August.
    • Handle: RePEc:anr:reveco:v:6:y:2014:p:913-926
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-080213-040759
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    Citations

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    Cited by:

    1. Yann Algan & Pierre Cahuc, 2010. "Inherited Trust and Growth," American Economic Review, American Economic Association, vol. 100(5), pages 2060-2092, December.
    2. Jia, Junxue & Ma, Guangrong & Qin, Cong & Wang, Liyan, 2020. "Place-based policies, state-led industrialisation, and regional development: Evidence from China's Great Western Development Programme," European Economic Review, Elsevier, vol. 123(C).
    3. repec:hal:spmain:info:hdl:2441/432sbils8u9t7qa99cii5psht1 is not listed on IDEAS
    4. Robert Dalitz, 2016. "Innovation and growth: The Australian Productivity Commission’s policy void?," The Economic and Labour Relations Review, , vol. 27(2), pages 199-214, June.
    5. Justin Yifu Lin & Xiaobing Wang, 2019. "The Facilitating State and Economic Development: The Role of the State in New Structural Economics," Book, University of Warsaw, Faculty of Management, edition 1, volume 1, number y:2019:v:1:ch:6:p:123-141 edited by Justin Yifu Lin & Alojzy Z. Nowak, June.
    6. Yann Algan & Pierre Cahuc, 2010. "Inherited Trust and Growth," American Economic Review, American Economic Association, vol. 100(5), pages 2060-2092, December.
    7. Orlando Gomes, 2021. "Growth theory under heterogeneous heuristic behavior," Journal of Evolutionary Economics, Springer, vol. 31(2), pages 533-571, April.
    8. Liliana Gelabert & Martín Pereyra & Flavia Roldán, 2021. "Public support prevalence and innovation behavior. Uruguay 2007-2015," Documentos de Investigación 127, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    9. Pranab Bardhan, 2016. "State and Development: The Need for a Reappraisal of the Current Literature," Journal of Economic Literature, American Economic Association, vol. 54(3), pages 862-892, September.

    More about this item

    Keywords

    knowledge externalities; credit constraints; targeted policies; governance; welfare state;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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