Public Funding for Basic Research in an Endogenous Growth Model

Abstract

The paper deals with the effects of government policy promoting basic research as an incentive to economic growth. Government is included into a Schumpeterian endogenous growth model, in which, thanks to the income proceeding from proportional taxation of monopolistic enterprises profits, it is enabled to carry out basic research activities which match applied research carried out by private enterprises. The results obtained show how it is possible that government determine a taxation level able to optimize economic growth. The effectiveness will be determined by the market. In particular, high competition levels make government policy less effective.

Keywords: Endogenous Growth, Basic Research

JEL Classification: O31, O38, O40