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PUBLIC RESEARCH SPENDING IN AN ENDOGENOUS GROWTH MODEL

  • Kunihiko Konishi (a1)
Abstract

This study constructs a variety expansion growth model with public research spending. Public researchers financed by taxes on asset income, consumption, and corporate profits raise the productivity of private research and development. We show that the welfare-maximizing level of public research spending is below the growth-maximizing level. With regard to tax policy, a zero-profit tax maximizes the welfare of households. In addition, the study analyzes the dynamics of the economy, showing that equilibrium is indeterminate when the government's revenue source depends on an asset income tax.

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Corresponding author
Address correspondence to: Kunihiko Konishi, Institute of Economic Research, Kyoto University, Yoshida-honmachi, Sakyo-ku, Kyoto 606-8501, Japan; [Research Fellow of the Japan Society for the Promotion of Science (JSPS)]; e-mail: k.konishi.econ@gmail.com.
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I would like to express my sincere gratitude to the associate editor and the anonymous referees for their constructive comments and suggestions. I am especially grateful to Koichi Futagami for helpful discussions and suggestions. I also thank Shinsuke Ikeda, Tatsuro Iwaisako, Noritaka Maebayashi, Yoshiyasu Ono, Asuka Oura, and participants at the 2013 Autumn Annual Meeting of the Japanese Economic Association at Kanagawa University for their comments. The financial support from Grants for Excellent Graduate Schools, MEXT, Japan and the Research Fellowship for Young Scientists of the Japan Society for the Promotion of Science (JSPS) are gratefully acknowledged. Any errors are my responsibility.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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