Quantifying Optimal Growth Policy

The optimal mix of growth policies is derived within a comprehensive endogenous growth model. The analysis captures important elements of the tax-transfer system and takes into account transitional dynamics. Currently, for calculating corporate taxable income US firms are allowed to deduct approximately all of their capital and R&D costs from sales revenue. Our analysis suggests that this policy leads to severe underinvestment in both R&D and physical capital. We find that firms should be allowed to deduct between 2-2.5 times their R&D costs and about 1.5-1.7 times their capital costs. Implementing the optimal policy mix is likely to entail huge welfare gains.economic growth, endogenous technical change, optimal growth policy, tax-transfer system, transitional dynamics

The macroeconomics of TANSTAAFL

This paper shows that dynamic inefficiency can occur in dynamic general equilibrium models with fully optimizing, infinitely-lived households even in a situation with underinvestment. We identify necessary conditions for such a possibility and illustrate it in a standard R&D-based growth model. Calibrating the model to the US, we show that a moderate increase in the R&D subsidy indeed leads to an intertemporal free lunch (i.e., an increase in per capita consumption at all times). Hence, Milton Friedman's conjecture There ain't no such thing as a free lunch (TANSTAAFL) may not apply. --intertemporal free lunch,dynamic inefficiency,R&D-based growth,transitional dynamics

Dynamically optimal R&D subsidization

Previous research on optimal R&D subsidies has focussed on the long run. This paper characterizes the optimal time path of R&D subsidization in a semi-endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented. --R&D subsidy,transitional dynamics,semi-endogenous growth,welfare

Multi-dimensional transitional dynamics : a simple numerical procedure

We propose the relaxation algorithm as a simple and powerful method for simulating the transition process in growth models. This method has a number of important advantages: (1) It can easily deal with a wide range of dynamic systems including multi-dimensional systems with stable eigenvalues that di.er drastically in magnitude. (2) The application of the procedure is fairly user friendly. The only input required consists of the dynamic system. (3) The variant of the relaxation algorithm we propose exploits in a natural manner the in.nite time horizon, which usually underlies optimal control problems in economics. Overall, it seems that the relaxation procedure can easily cope with a large number of problems which arise frequently in the context of macroeconomic dynamic models. As an illustrative application, we simulate the transition process of the well-known Jones (1995) model.saddlepoint problems, transitional dynamics, economic growth, multidimensional stable manifolds

Isotopenhydrologische Untersuchungen der Schneedecke am Pico de Teide (Teneriffa)

Meteorologische Messungen am Pico de Teide (Teneriffa) ergaben für die Hochlagen (> 2800 m ü. d. M.) ein Dampfdruckgefälle von der Schneedeckenoberfläche zur Atmosphäre. Damit sind Voraussetzungen für den Abbau der Schneedecke auch durch Verdunstung und Sublimation gegeben. Isotopenhydrologische Untersuchungen der Schneedecke bestätigen diese Energie- und Massenumsätze. 2H und 180 zeigen eine deutliche Anreicherung an der Oberfläche während des gesamten Meßzeitraumes. In tiefen Lagen um 2400 m ü. d. M. alternieren Verdunstung, Kondensation und Schmelze, da sowohl in der Nacht als auch am Tage Phasen mit einem niedrigeren Dampfdruck über der Schneedeckenoberfläche als in der Atmosphäre auftreten. Die Bedeutung von Schmelzvorgängen beim Abbau der Schneedecke steigt mit abnehmender Höhenlage. Mit dem Schmelzwasser kommt es zur Verlagerung schwerer Isotope zur Basis der Schneedecke. Der Abfluß aus der Schneedecke ist isotopisch schwerer als die verbleibende Schneerücklage, da mit dem Schmelzwasser bevorzugt schwere Isotope, die durch Verdunstungsvorgänge an der Schneedeckenoberfläche zunächst angereichert werden, transportiert werden. Der Abbau der Schneedecke erfolgt von der Oberfläche

Dynamically optimal R&D subsidization

Previous research on optimal R& D subsidies has focussed on the long run. This paper characterizes the optimal time path of R& D subsidization in a semi- endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R& D subsidization in the US, the R& D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R& D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented

Dynamically optimal R&D subsidization

Previous research on optimal R&D subsidies has focussed on the long run. This paper characterizes the optimal time path of R&D subsidization in a semi-endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented

The Macroeconomics of TANSTAAFL

This paper shows that dynamic inefficiency can occur in dynamic general equilibrium models with fully optimizing, infinitely-lived households even in a situation with underinvestment. We identify necessary conditions for such a pos- sibility and illustrate it in a standard R\&D-based growth model. Calibrating the model to the US, we show that a moderate increase in the R\&D subsidy indeed leads to an intertemporal free lunch (i.e., an increase in per capita consumption at all times). Hence, Milton Friedmans conjecture There aint no such thing as a free lunch (TANSTAAFL) may not apply

Dynamically optimal R&D subsidization

Previous research on optimal R&D subsidies has focussed on the long run. This paper characterizes the optimal time path of R&D subsidization in a semi-endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented