Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-10T13:15:01.218Z Has data issue: false hasContentIssue false
  • English
  • Français

HIGHER EDUCATION SUBSIDY POLICY AND R&D-BASED GROWTH

Published online by Cambridge University Press:  30 April 2019

Takaaki Morimoto  and
Ken Tabata
Takaaki Morimoto
Affiliation:
Osaka University
Ken Tabata*
Affiliation:
Kwansei Gakuin University
*
Address correspondence to: Ken Tabata, School of Economics, Kwansei Gakuin University, 1-155 Uegahara Ichiban-cho, Nishinomiya 662-8501, Hyogo, Japan. e-mail: tabataken@kwansei.ac.jp.
Get access Rights & Permissions [Opens in a new window]

Abstract

We examine how a subsidy policy for encouraging more individuals to pursue higher education affects economic growth in an overlapping generations model of R&D-based growth, including both product development and process innovation. We show that such a policy may have a negative effect on the long-run economic growth rate. When the market structure adjusts partially in the short run, the effect of an education subsidy on economic growth is ambiguous and depends on the values of the parameters. However, when the market structure adjusts fully in the long run, the education subsidy expands the number of firms but reduces economic growth. These unfavorable predictions of an education subsidy on economic growth are partly consistent with the empirical findings that mass higher education does not necessarily lead to higher economic growth.

Keywords

Higher EducationOccupational ChoiceProduct DevelopmentProcess Innovation
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 8 , December 2020 , pp. 2129 - 2168
Copyright
© 2019 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful for helpful comments from the associate editor, two anonymous referees, Tetsugen Haruyama, Ken-ichi Hashimoto, Akira Momota, Akihisa Shibata, Daishin Yasui, and seminar participants at Yamaguchi University and Kumamoto Gakuen University. All remaining errors are our own. Financial support from the Grant-in-Aid for Scientific Research (C) from the Japan Society for the Promotion of Science No. 17K03638 is gratefully acknowledged.

References

Acemoglu, D. (2002) Directed technical change. The Review of Economic Studies 69, 781–809.CrossRefGoogle Scholar
Aghion, P. and Howitt, P. (1992) A model of growth through creative destruction. Econometrica 60, 323–351.Google Scholar
Ang, J. B. and Madsen, J. B. (2011) Can second-generation endogenous growth models explain productivity trends and knowledge production in the Asian miracle economies? Review of Economics and Statistics 93, 1360–1373.Google Scholar
Barr, N. (2012) Economics of the Welfare State, 5th ed. Oxford: Oxford University Press.Google Scholar
Barro, R. J. and Sala-i-Martin, X. (2004) Economic Growth, 2nd ed. Cambridge, MA: MIT Press.Google Scholar
Benassy, J.-P. (1996) Taste for variety and optimum production patterns in monopolistic competition. Economics Letters 52, 41–47.CrossRefGoogle Scholar
Böhm, S., Grossmann, V. and Steger, T. M. (2015) Does expansion of higher education lead to trickledown growth? Journal of Public Economics 132, 79–94.CrossRefGoogle Scholar
Britton, E., Larsen, J. D. J. and Small, I. (2000) Imperfect competition and the dynamics of mark-ups. Bank of England, Bank of England working papers 110.Google Scholar
Broda, C., Greenfield, J. and Weinstein, D. (2006) From groundnuts to globalization: A structural estimate of trade and growth. National Bureau of Economic Research, NBER Working Papers 12512.CrossRefGoogle Scholar
Brunnschweiler, C. N., Peretto, P. F. and Valente, S. (2017) Wealth creation, wealth dilution, and population dynamics. Duke University, Economic Research Initiatives at Duke (ERID) Working Paper 258.Google Scholar
BIS (2011) Supporting analysis of the higher education white paper. Department for Business, Innovation and Skills (BIS), BIS Economics Paper 14.Google Scholar
Chen, H.-J. (2015) Child allowances, educational subsidies and occupational choice. Journal of Macroeconomics 44, 327–342.Google Scholar
Cohen, D. and Soto, M. (2007) Growth and human capital: Good data, good results. Journal of Economic Growth 12, 51–76.CrossRefGoogle Scholar
Diamond, P. A. (1965) National debt in a neoclassical growth model. American Economic Review 55, 1126–1150.Google Scholar
Dixit, A. K. and Stiglitz, J. E. (1977) Monopolistic competition and optimum product diversity. The American Economic Review 67, 297–308.Google Scholar
Gali, J., Gertler, M. and David López-Salido, J. (2007) Markups, gaps, and the welfare costs of business fluctuations. Review of Economics and Statistics 89, 44–59.Google Scholar
Galor, O. and Moav, O. (2004) From physical to human capital accumulation: Inequality and the process of development. Review of Economic Studies 71, 1001–1026.CrossRefGoogle Scholar
Galor, O. and Weil, D. N. (2000) Population, technology and growth: From Malthusian stagnation to the demographic transition and beyond. American Economic Review 90, 806–828.CrossRefGoogle Scholar
García-Peñalosa, C. and Turnovsky, S. J. (2006) Growth and income inequality: A canonical model. Economic Theory 28, 25–49.CrossRefGoogle Scholar
García-Peñalosa, C. and Turnovsky, S. J. (2011) Taxation and income distribution dynamics in a neoclassical growth model. Journal of Money, Credit and Banking 43, 1543–1577.Google Scholar
Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2004) Do institutions cause growth?. Journal of Economic Growth 9, 271–303.CrossRefGoogle Scholar
Grossman, G. M. and Helpman, E. (1991) Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.Google Scholar
Grossmann, V. (2007) How to promote R&D-based growth? Public education expenditure on scientists and engineers versus R&D subsidies. Journal of Macroeconomics 29, 891–911.Google Scholar
Grossmann, V. (2009) Entrepreneurial innovation and economic growth. Journal of Macroeconomics 31, 602–613.Google Scholar
Ha, J. and Howitt, P. (2007) Accounting for trends in productivity and R&D: A Schumpeterian critique of semi-endogenous growth theory. Journal of Money, Credit and Banking 39, 733–774.Google Scholar
Hanushek, E. A. (2016) Will more higher education improve economic growth? Oxford Review of Economic Policy 32, 538–552.CrossRefGoogle Scholar
Hanushek, E. A. and Woessmann, L. (2011) How much do educational outcomes matter in OECD countries? Economic Policy 26, 427–491.CrossRefGoogle Scholar
Holmes, C. (2013) Has the expansion of higher education led to greater economic growth? National Institute Economic Review 224, 29–47.CrossRefGoogle Scholar
Howitt, P. (1999) Steady endogenous growth with population and R&D inputs growing. Journal of Political Economy 107, 715–730.CrossRefGoogle Scholar
Jones, C. I. (1995) R&D-based models of economic growth, Journal of Political Economy 103, 759–784.CrossRefGoogle Scholar
Krueger, A. B. and Lindahl, M. (2001) Education for growth:Why and for whom? Journal of Economic Literature 39, 1101–1136.CrossRefGoogle Scholar
Laincz, C. and Peretto, P. (2006) Scale effects in endogenous growth theory: An error of aggregation not specification. Journal of Economic Growth 11, 263–288.Google Scholar
Madsen, J. (2008) Semi-endogenous versus Schumpeterian growth models: Testing the knowledge production function using international data. Journal of Economic Growth 13, 1–26.Google Scholar
Madsen, J., Ang, J. and Banerjee, R. (2010) Four centuries of British economic growth: The roles of technology and population. Journal of Economic Growth 15, 263–290.CrossRefGoogle Scholar
Morimoto, T. and Tabata, K. (2019) Higher Education Subsidy Policy and R&D-based Growth. School of Economics, Kwansei Gakuin University Discussion Paper Series 178-2.Google Scholar
OECD (2016a) Entrepreneurship at a Glance 2016. Organisation for Economic Cooperation and Development.Google Scholar
OECD (2016b) Education at a Glance 2016. Organisation for Economic Cooperation and Development.Google Scholar
OECD (2017) Research and Development Statistics 2017. Organisation for Economic Cooperation and Development.Google Scholar
Peretto, P. F. (1998) Technological change and population growth. Journal of Economic Growth 3, 283–311.CrossRefGoogle Scholar
Peretto, P. F. and Connolly, M. (2007) The manhattan metaphor. Journal of Economic Growth 12, 329–350.CrossRefGoogle Scholar
Romer, P. M. (1990) Endogenous technological change. Journal of Political Economy 98, 71–102.CrossRefGoogle Scholar
Segerstrom, P. S. (1998) Endogenous growth without scale effects. American Economic Review 88, 1290–1310.Google Scholar
Strulik, H., Prettner, K. and Prskawetz, A. (2013) The past and future of knowledge-based growth. Journal of Economic Growth 18, 411–437.Google Scholar
Tanaka, H. and Iwaisako, T. (2011) Product cycles, endogenous skill acquisition, and wage inequality. Canadian Journal of Economics 42, 300–331.Google Scholar
Nations, United (2015) World Population Prospects: The 2015 Revision, DVD Edition. United Nations, Department of Economic and Social Affairs, Population Division.Google Scholar
Vandenbussche, J., Aghion, P. and Meghir, C. (2006) Growth, distance to frontier and composition of human capital. Journal of Economic Growth 11, 97–127.Google Scholar
Young, A. (1998) Growth without scale effects. Journal of Political Economy 106, 41–63.CrossRefGoogle Scholar