nep-knm 2018-08-27 papers

on Knowledge Management and Knowledge Economy

Issue of 2018‒08‒27
one paper chosen by
Laura Ştefănescu
Centrul European de Studii Manageriale în Administrarea Afacerilor

Should the Government Subsidize Innovation or Automation? By Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing

Should the Government Subsidize Innovation or Automation?

By:	Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing
Abstract:	This study introduces automation into a Schumpeterian model to explore the different effects of R&D and automation subsidies. R&D subsidy increases innovation and decreases the share of automated industries with an overall inverted-U effect on economic growth. Automation subsidy decreases innovation and increases the share of automated industries also with an inverted-U effect on growth. Calibrating the model to US data, we find that the current level of R&D (automation) subsidy is above (below) the growth-maximizing level. Simulating transition dynamics, we find that changing R&D (automation) subsidy to its growth-maximizing level causes a welfare gain of 3.8% increase in consumption.
Keywords:	automation, innovation, economic growth
JEL:	O3 O4
Date:	2018–08
URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:88276&r=knm

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