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Public Policy and Growth in Canada: An Applied Endogeneous Growth Model with Human and Knowledge Capital Accumulation

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  • Voyvoda, Ebru
  • Yeldan, Erinc
Abstract
We analytically investigate and assess the interactions between knowledge driven growth, acquisition of human capital, and the role of strategic public policy for the Canadian economy within the context of a general equilibrium model. For the purpose of characterization of a fully advanced economy, sources of economic growth are endogenized through the simultaneous interaction of two activities: technological innovations and human capital formation. Both of these activities have cross spill-over effects onto each other. With the aid of the modeling framework utilized in this paper, we aim to contribute to the intense discussion on “Canada’s Innovation/R&D puzzle” from a macroeconomic perspective, with a focus on the role of strategic public polices. To this end, we investigate alternative public policies aimed at fostering the development of human capital (investment in education, learning, basic research) and those at enhancing total factor productivity through investments in innovation; and study the impact of these public subsidization policies on patterns of growth, investment and capital accumulation, social welfare, and burden on government budget. Our results suggest that the re-allocation effects triggered by public subsidization policies on higher education and, alternatively on Industry/business R&D might be contributing to the current discussion that Canadian economy is falling short of it’s potential in (business) technological innovation and R&D production.

Suggested Citation

  • Voyvoda, Ebru & Yeldan, Erinc, 2012. "Public Policy and Growth in Canada: An Applied Endogeneous Growth Model with Human and Knowledge Capital Accumulation," Conference papers 332236, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332236
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    3. Batabyal, Amitrajeet A. & Beladi, Hamid, 2018. "Artists, engineers, and aspects of economic growth in a creative region," Economic Modelling, Elsevier, vol. 71(C), pages 214-219.
    4. Sansi Yang & C. Richard Shumway, 2020. "Knowledge accumulation in US agriculture: research and learning by doing," Journal of Productivity Analysis, Springer, vol. 54(2), pages 87-105, December.
    5. Attar, M. Aykut, 2021. "Growth, distribution and dynamic inefficiency in Turkey: An analysis of the naïve neoclassical theory of capital," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 20-30.
    6. Bai, Xuejie & Sun, Xianzhen & Chiu, Yung-Ho, 2020. "Does China's higher education investment play a role in industrial growth?," Technology in Society, Elsevier, vol. 63(C).
    7. Gamlath, Sharmila & Lahiri, Radhika, 2018. "Public and private education expenditures, variable elasticity of substitution and economic growth," Economic Modelling, Elsevier, vol. 70(C), pages 1-14.
    8. Shuang Yu & Xiaojun Zhao, 2021. "How Do Different Households Respond to Public Education Spending?," Sustainability, MDPI, vol. 13(20), pages 1-24, October.

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