Download this Paper Open PDF in Browser

Innovation Dynamics and Fiscal Policy: Implications for Growth, Asset Prices, and Welfare

66 Pages Posted: 20 Apr 2017  

Michael Donadelli

Goethe University Frankfurt - Research Center SAFE

Patrick Grüning

Bank of Lithuania - CEFER; Vilnius University - Faculty of Economics; Research Center SAFE

Multiple version iconThere are 2 versions of this paper

Date Written: April 13, 2017

Abstract

We study the general equilibrium implications of different fiscal policies on macroeconomic quantities, asset prices, and welfare by utilizing two endogenous growth models. The expanding variety model features only homogeneous innovations by entrants. The Schumpeterian growth model features heterogeneous innovations: "incremental" innovations by incumbents and "radical" innovations by entrants. The government levies taxes on labor income and corporate profits and supplies subsidies to consumption, capital investment, and investments in research and development by entrants and, if applicable, incumbents. With these models at hand, we provide new insights on the interplay of innovation dynamics and fiscal policy.

Keywords: Endogenous growth, Asset pricing, Government, Fiscal policy, Heterogeneous innovation

JEL Classification: E22, G12, H20, I30, O30

Suggested Citation

Donadelli, Michael and Grüning, Patrick, Innovation Dynamics and Fiscal Policy: Implications for Growth, Asset Prices, and Welfare (April 13, 2017). SAFE Working Paper No. 171. Available at SSRN: https://ssrn.com/abstract=2955089

Michael Donadelli (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Patrick Grüning

Bank of Lithuania - CEFER ( email )

Totoriu g. 4
Vilnius, LT-01121
Lithuania
+370 5 2680 069 (Phone)

HOME PAGE: http://https://www.lb.lt/cefer

Vilnius University - Faculty of Economics ( email )

Sauletekio al. 9 (II building)
Vilnius, LT-10222
Lithuania

HOME PAGE: http://www.ef.vu.lt/

Research Center SAFE ( email )

Goethe University Frankfurt
Theodor-W.-Adorno Platz 3
Frankfurt am Main, D-60629
Germany

HOME PAGE: http://safe-frankfurt.de/research/all-researchers/details/showauthor/patrick-gruening.html

Paper statistics

Downloads
60
Rank
237,711
Abstract Views
298