The macroeconomics of TANSTAAFL
BP2-STS
- Grossmann, Volker ORCID University of Fribourg, CESifo, IZA
- Steger, Thomas M. University of Leipzig, CESifo
- Trimborn, Timo University of Goettingen
- 2013
Published in:
- Journal of Macroeconomics. - Elsevier BV. - 2013, vol. 38, p. 76-85
English
Market imperfections may lead to underinvestment in dynamic general equilibrium models. An interesting but unexplored question is whether policy interventions which attenuate underinvestment gaps necessarily imply that consumption will initially decline. By employing a calibrated version of a standard R&D-based growth model, we show that raising the R&D subsidy rate may not only close the R&D underinvestment gap but also raise consumption per capita at all times (“intertemporal free lunch”). We also discuss the general mechanics of such an intertemporal free lunch in both one-sector and multi-sector growth models and further examples.
- Faculty
- Faculté des sciences économiques et sociales et du management
- Department
- Département d'économie politique
- Language
-
- English
- Classification
- Economics
- License
- License undefined
- Open access status
- green
- Identifiers
-
- DOI 10.1016/j.jmacro.2013.06.004
- ISSN 0164-0704
- Persistent URL
- https://folia.unifr.ch/unifr/documents/322926
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