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A dynamic general equilibrium model for public R&D investment in Taiwan

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  • Bor, Yungchang Jeffery
  • Chuang, Yih-Chyi
  • Lai, Wei-Wen
  • Yang, Chung-Min

Abstract

In terms of economic development policies, public research and development (R&D) investment may be one of the most critical and useful tools in Taiwan, having frequently played a role in leading related overall investment in Taiwan. Although the impact channels of R&D investment are varied and complex, its benefits in terms of the development of human capital, industrial productivity, and basic research are clear. With the rapid growth of the private sector in the Taiwan economy, it is, however, debatable whether the government should continue to use the public financial budget to invest in R&D. By using a computable general equilibrium (CGE) model to simulate the impact of public R&D investment on the economy in Taiwan, the empirical evidence of the present paper is that public R&D investment gives rise to different short-term and medium-term impacts on real GDP that are mostly felt in the third or fourth years of their implementation among different industries. These impacts then gradually converge back to equilibrium in the long run. Public R&D investment boosts the technology of high-tech industries and increases exports, but it also crowds out the output of primary industries. Although the public R&D investment has a positive effect on the real wage, its effect on inflation should not be overlooked. Because of the pros and cons surrounding the impact of public R&D investment on industries and the economy, the study provided by the present paper can serve as valuable reference not only to decision-makers in government agencies but also to academic researchers.

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  • Bor, Yungchang Jeffery & Chuang, Yih-Chyi & Lai, Wei-Wen & Yang, Chung-Min, 2010. "A dynamic general equilibrium model for public R&D investment in Taiwan," Economic Modelling, Elsevier, vol. 27(1), pages 171-183, January.
  • Handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:171-183
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    2. Juyong Lee & Youngsang Cho & Jungwoo Shin, 2019. "A Study on the Optimal Ratio of Research and Development Investment in the Energy Sector: An Empirical Analysis in South Korea," Energies, MDPI, vol. 12(2), pages 1-12, January.
    3. Zheng, Qinyue & Wang, Xingmin & Bao, Chunbing, 2024. "Enterprise R&D, manufacturing innovation and macroeconomic impact: An evaluation of China’s Policy," Journal of Policy Modeling, Elsevier, vol. 46(2), pages 289-303.
    4. repec:aly:journl:202218 is not listed on IDEAS
    5. Gökhan Karan & Yavuz Elitok, 2015. "The Analysis of Expenses for R&D Activities in Turkey," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(11), pages 561-567, November.
    6. Francesco Di Comite & D'Artis Kancs & Wouter Torfs, 2015. "Macroeconomic Modelling of R&D and Innovation Policies," JRC Research Reports JRC89558, Joint Research Centre.
    7. Gomes, Alexandre & Perobelli, Fernando & Pio, João, 2016. "The Impact of expenditure on R & D within the Brazilian economy: an approach to Computable General Equilibrium," Conference papers 330169, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Hong, Chanyoung & Yang, Heewon & Hwang, Wonsik & Lee, Jeong-Dong, 2014. "Validation of an R&D-based computable general equilibrium model," Economic Modelling, Elsevier, vol. 42(C), pages 454-463.
    9. Betarelli Junior, Admir Antonio & Faria, Weslem Rodrigues & Gonçalves Montenegro, Rosa Livia & Bahia, Domitila Santos & Gonçalves, Eduardo, 2020. "Research and development, productive structure and economic effects: Assessing the role of public financing in Brazil," Economic Modelling, Elsevier, vol. 90(C), pages 235-253.
    10. Proque, Andressa Lemes & Betarelli Junior, Admir Antonio & Perobelli, Fernando Salgueiro, 2022. "Fuel tax, cross subsidy and transport: Assessing the effects on income and consumption distribution in Brazil," Research in Transportation Economics, Elsevier, vol. 95(C).
    11. Courtioux, Pierre & Métivier, François & Rebérioux, Antoine, 2022. "Nations ranking in scientific competition: Countries get what they paid for," Economic Modelling, Elsevier, vol. 116(C).

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