Public deficits and economic growth
Considering an integrated area, this paper deals with the balance between the positive effects in the degree of economic cohesion resulting from R&D subsidies, temporarily granted from an imitator and less developed country, and the external negative effects arising from the eventual creation of excessive public deficits. We propose and numerically solve a model of a monetary union between two countries, one being innovator and the other imitator. Results suggest the pertinence of allowing for a temporary differentiation of fiscal discipline rules in favour of the less developed country. R&D subsidies granted by this country seem to lead to an easier catching-up without producing important negative external effects, also as not hurting severely the conditions for long-run sustainability of public accounts.
Year of publication: |
2009
|
---|---|
Authors: | Afonso, Oscar ; Alves, Rui Henrique ; Vasconcelos, Paulo B. |
Published in: |
Economic Modelling. - Elsevier, ISSN 0264-9993. - Vol. 26.2009, 5, p. 1101-1109
|
Publisher: |
Elsevier |
Keywords: | Economic growth R&D subsidies Economic cohesion Public deficits Numerical computations |
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