Abstract
This paper builds up an endogenous growth model à la Aghion and Howitt (1992) and Boucekkine et al (2005). We assume that R&D firms use only investment good as input, instead of final good as hypothesized in the above two models. We show that investment price will be a negative function of aggregate quality index; and thus decline over time. In this model, subsidy on R&D has growth-enhancing effect. Moreover, this model predicts unambiguously that R&D is procyclical.
| Original language | English |
|---|---|
| Number of pages | 12 |
| Journal | Journal of Applied Economics and Business Research |
| Volume | 3 |
| Issue number | 3 |
| Publication status | Published - 2013 |
| Externally published | Yes |
