An endogenous growth CGE model of the Japanese economy: The implications of trade and R&D promoting policies

Date

1998

Author

Diao, Xinshen
Roe, Terry
Yeldan, Erinç

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We introduce and explore the properties of a multi-sector general equilibrium model with endogenous growth, the antecedents of which are the R&D-based growth models of Romer (1990), and Grossman and Helpman (1992). The model is specified and calibrated to the data from Japan, and is solved to obtain both the transitional and the steady state equilibria. We explore the growth incidences of two groups of policies: (i) import protection through tariffs; and (ii) R&D promotion through subsidies. The model results suggest that trade policies affect growth, but in the absence of explicit recognition of international spillovers, such effects on long-term growth are small. R&D promoting policies induce private agents to allocate more resources to R&D activities which raise productivity of the R&D production and the production of capital variety. In turn, we find significantly high growth effects together with sizable gains in social welfare.

URI

http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd
https://hdl.handle.net/11511/108321

Collections

Department of Economics, Article