Occasional CEE Seminar: Oğuz Öztunalı
Occasional CEE Seminar
“Directed Technological Change and Government Policy
In this paper, building on the directed technological change literature a-la-Acemoglu (1998, 2002), and borrowing some elements from Kiley (1999) and Galor and Moav (2000), I analyze the effects of government policies on the direction of technological progress and welfare. Specically I ask the following question: Can subsidizing a sector which currently has a comparatively low level of productivity, but also a higher potential growth rate of productivity be welfare improving in a directed technical change setting where monopoly rights over inventions last a finite number of periods? Numerical simulations of my model provide support for such a welfare-improving subsidy policy. Moreover, my model also allows me to analyze effects of subsidies on new inventions in various different versions of intellectual property rights. Here, I show that subsidies are generally welfare improving when property rights are not well enforced; however this effect weakens with better enforcement of property rights.