Redistributive Innovation Policy, Inequality and Growth

Yoseph Getachew & Parantap Basu, University of Pretoria

Using a heterogenous-agent growth model with in-house R&D and imperfect capital market, we examine the growth and distributional effects of alternative public R&D policies that target high-tech and low-tech sectors. A regressive public R&D policy could boost growth via a positive effect on individual saving and effort whereas it escalates the economic inequality, giving rise to classic efficiency-equity trade-offs. The relationship between the degree of regressivity in the R&D spending and long run welfare is thus hump shaped admitting an optimal degree of regressivity in public R&D spending. In contrast, a progressive R&D policy could be growth and welfare improving if it is designed by a combination of consumption tax and investment subsidy. Higher investment subsidy could promote long run growth and lower economic inequality. Our calibration of the model helps us understand the contrasting effects of public R&D spending on inequality and growth of the US and African economies.

About the speaker

Yoseph Getachew has obtained a Ph.D. from UNU MERIT Maastricht University in October 2009. He had been a Research Fellow in Durham University, the UK, between August 2010 and December 2013. Since March 2014, he has been appointed as a Senior Lecturer at the University of Pretoria, South Africa. His expertise lies in both theoretical and empirical development macroeconomics. His main research interests are Economic Growth, Public Policy, Inequality and Mobility. He has published peer-reviewed papers in reputed international journals including the Journal of Macroeconomics, Macroeconomic Dynamics, Research in Economics and Economics Letters.

Venue: Conference room (room 0.16 & 0.17)

Date: 12 December 2016

Time: 12:00 - 13:00