The Importance of Industrial Policy in Quality-Ladder Growth Models

Giordani, Paolo E. and Zamparelli, Luca (2008) The Importance of Industrial Policy in Quality-Ladder Growth Models. The B.E. Journal of Macroeconomics, 8 (1). p. 1-30.

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Abstract/Index

We extend the class of quality-ladder growth models (Grossman and Helpman, 1991, Segerstrom, 1998 and others), to encompass an economy with asymmetric fundamentals. In contrast to the standard framework, in our model industries may differ in terms of their innovative potential (quality jumps and arrival rates) and consumers' preferences. This extension allows us to bring industrial policy back into the realm of the growth policy debate. We first show that it is always possible to raise the long-run growth rate and the social welfare of the economy through a costless tax/subsidy scheme reallocating resources towards the relatively more promising industries. We then prove that, in certain economies, even a mere profit taxation policy increases economic growth and social welfare above the laissez-faire.

Item Type: Article
Research documents and activity classification: Journal Articles > Articles > Articles published in or submitted to a Journal with IF
Divisions: Department of Business and Management
Uncontrolled Keywords: Innovation-driven Growth, Asymmetric Fundamentals, Industrial Policy
MIUR Scientific Area: Area 13 - Economics and Statistics > SECS-P/01 Political Economy
Deposited by: Maria Teresa Nistico
Date Deposited: 25 Nov 2010 08:24
Last Modified: 21 Apr 2015 23:13
URI: http://eprints.luiss.it/id/eprint/751

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