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GTAP Resource #164

"Strategic Policies and Growth: An Applied Model of R&D-Driven Endogenous Growth"
by Diao, Xinshen, Terry Roe and A. Erinc Yeldan

We introduce and explore a general equilibrium model with R&D-driven endogenous growth, whose antecedents are the models of Romer (1990), and Grossman and Helpman (1991). Utilizing evidence from recent econometric studies on sources of growth, the model also accounts explicitly for cross-border technological spillovers. The model is specified and calibrated to data from Japan, and is solved to obtain both the transitional and the steady state equilibria. We explore the effects of selective trade and R&D promotion policies on long-run growth and social welfare. The model results suggest that while a strategic trade policy has little effect on reallocating resources into domestic R&D activities, it can significantly affect the cross-border spillovers of technological knowledge, which in turn stimulates growth. We find that trade liberalization may cause the growth rate to fall and lead to a loss of social welfare in the long-run, although it improves welfare in the short-run. R&D promotion policies stimulate growth by inducing private agents to allocate more resources to domestic R&D, as well as to take greater advantage of global R&D spillovers. Here, we find significantly high growth effects together with sizable gains in social welfare at low incidence to tax payers.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: Journal of Development Economics
Date: 1999
Version: 60
Created: Bacou, M. (9/27/2000)
Updated: Diao, X. (11/14/2001)
Visits: 2,820
- Economic growth

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