We show that a DSGE model in which subsidies to private sector R&D stimulate economic growth, following the predictions of semi-endogenous growth theory, can account for the joint behaviour of UK output and total factor productivity for 1981-2010. R&D subsidies are measured as government-funded...

We propose an innovation-driven growth model in which education is determined by family background and cognitive ability. We show that compulsory schooling can move a society from elite education to mass education, which then triggers market R&D. This means that our model rationalizes two...

I theoretically and empirically show that dismissal laws - laws that impose hurdles on firing of employees - spur innovation and thereby economic growth. Theoretically, dismissal laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish...

This paper studies a simple endogenous growth model to explain growth slowdowns. It is designed to explain, for example, the middle income trap often observed in the south-east Asian countries, the U.K.'s productivity puzzle after the Great Recession and the lost decades of Japan in a unified...

Tax changes are often announced before their implementation and are not permanent, but rather only temporary. Accordingly, R&D firms will optimally adjust their investment decisions to fit tax schedule changes. This study analyzes how changes in various tax rates relevant to corporate activities...