Effects of R&D Subsidies in a Hybrid Model of Endogenous Growth and Semi-Endogenous Growth

Angus Chu and Xilin Wang

MPRA Paper from University Library of Munich, Germany

Abstract: This study explores the effects of R&D subsidies in a hybrid growth model in which the economy may exhibit semi-endogenous growth or fully endogenous growth. We consider two types of R&D 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 a higher subsidy rate leads to an earlier activation of quality-improving innovation and increases the transitional and steady-state growth rate. R&D subsidies on variety-expanding innovation have contrasting effects in the two regimes. In the semi-endogenous-growth regime, a higher subsidy rate on variety-expanding innovation increases transitional growth but has no effect on steady-state growth. In the fully-endogenous-growth regime, a higher subsidy rate on variety-expanding innovation continues to increase short-run growth but delays the activation of quality-improving innovation and reduces long-run growth. Increasing R&D subsidies on variety-expanding (quality-improving) innovation makes the semi-endogenous-growth (fully-endogenous-growth) regime more likely to emerge in equilibrium.

Keywords: R&D subsidies; innovation; endogenous growth regimes (search for similar items in EconPapers)
JEL-codes: O3 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-gro and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: EFFECTS OF R&D SUBSIDIES IN A HYBRID MODEL OF ENDOGENOUS GROWTH AND SEMI-ENDOGENOUS GROWTH (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:94620

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