Social policies and R&D subsidies: Impact on inequality, unemployment, growth and the tax burden
Purpose – The paper seeks to analyse the impact of different public policies on inequality, unemployment, growth and the tax burden. Design/methodology/approach – A dynamic general equilibrium model is built, in which growth is driven by endogenous technical progress, to analyse the impacts of several policies (minimum wage, redistribution and R&D subsidies financed by an income tax). Findings – All policies except pure redistribution are better than non-intervention in terms of growth. The authors distinguish three major policy patterns. The Anglo-Saxon model is characterised by high growth, high inequality, low unemployment and a low tax burden. The Nordic model combines high growth, low inequality and low unemployment, and a high tax burden. The Continental European model puts together medium inequality and a medium tax burden, and higher long-term growth is paid for by high unemployment. Research limitations/implications – The model could be extended by the introduction of educational policy. Originality/value – The paper distinguishes three configurations that capture the main features of the developments in Anglo-Saxon countries, Scandinavian countries, and Continental European countries in the 1990s. It thereby provides a general framework to analyse and compare these experiences.
Economic growth, Pay, Research and development, Subsidies, Unemployment
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