Lessons for Tax Reform from an Equilibrium Model of Innovation

Ferraro, Domenico; Ghazi, Soroush; Peretto, Pietro F.

doi:10.2139/ssrn.3325987

Cited by 2 publications

(1 citation statement)

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“…Also, when φ > 0.068, the quality growth rate z * is positive (i.e., the fully endogenous-growth regime emerges in equilibrium). Ferraro et al (2019) estimate the operating cost parameter φ and find that its mean estimate is 0.125 with a standard error of 0.027. 20 Therefore, we can conclude that under reasonable parameter values, the fully endogenous-growth regime with both quality-improving innovation and variety-expanding innovation is more likely to emerge than the semi-endogenous growth regime.…”

Section: Quantitative Analysismentioning

confidence: 99%

EFFECTS OF R&D SUBSIDIES IN A HYBRID MODEL OF ENDOGENOUS GROWTH AND SEMI-ENDOGENOUS GROWTH

Chu

Wang

2020

Macroecon. Dynam.

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We explore R&D subsidies in a hybrid growth model which may exhibit semi-endogenous growth or fully endogenous growth. We consider two types of subsidies on variety-expanding innovation and quality-improving innovation. R&D subsidies on quality-improving innovation only have effects in the fully endogenous-growth regime, in which more subsidies cause an earlier activation of quality-improving innovation and increase the transitional/steady-state growth rate. R&D subsidies on variety-expanding innovation have contrasting effects in the two regimes. In the semi-endogenous-growth regime, more subsidies on variety-expanding innovation increase transitional growth but have no effect on steady-state growth. In the fully endogenous-growth regime, more subsidies on variety-expanding innovation continue to increase short-run growth but delay the activation of quality-improving innovation and reduce long-run growth. Increasing subsidies on variety-expanding (quality-improving) innovation makes the semi-endogenous-growth (fully endogenous-growth) regime more likely to emerge. Finally, we calibrate the model and find that under reasonable parameter values, the fully endogenous-growth regime is more likely to emerge.

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Section: Quantitative Analysismentioning

confidence: 99%