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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.
    • Handle: RePEc:osk:wpaper:1326
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    References listed on IDEAS

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    Cited by:

    1. Kunihiko Konishi, 2015. "Basic and Applied Research: A Welfare Analysis," Discussion Papers in Economics and Business 15-08, Osaka University, Graduate School of Economics.

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    More about this item

    Keywords

    Public expenditure; Endogenous growth; Innovation; Indeterminacy;
    All these keywords.

    JEL classification:

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

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