Open access
Autor(in)
Datum
2009-08Typ
- Working Paper
ETH Bibliographie
yes
Altmetrics
Abstract
An established result of the endogenous growth literature is that competitive equilibria in expanding-varieties models are suboptimal due to the rent-effect: monopolistic pricing drives the equilibrium quantity of each intermediate below the efficient level, implying that it is optimal to subsidize nal producers. This paper shows that, if scale effects are eliminated by including R&D spillovers in the model, normative prescriptions change. Since the laissez-faire economy under-invests into R&D activity, the share of resources devoted to intermediates production increases, and this reallocation e¤ect contrasts the rent-effect. In many scenarios, including the polar case of logarithmic preferences, the reallocation e¤ect surely dominates: the equilibrium quantity of each intermediate exceeds the optimal one, and the optimal policy consists of taxing final producers because scal authorities must internalize the overshooting mechanism generated by under-investment in R&D. Mehr anzeigen
Persistenter Link
https://doi.org/10.3929/ethz-a-005868915Publikationsstatus
publishedZeitschrift / Serie
Economics Working Paper SeriesBand
Verlag
ETH Zurich, Center of Economic Research (CER-ETH)Thema
Endogenous growth; Scale effects; R&D externalities; Optimal policyOrganisationseinheit
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.
ETH Bibliographie
yes
Altmetrics