Government's research policy and economic growth: Capital, knowledge and economic

Abstract

This study proposes a growth model to examine dynamic processes of capital and knowledge accumulation and price structure. The economy consists of three - agriculture, industry and service - production sectors and one knowledge creator - the university. There are four - land, capita], labor force and knowledge - factors of economic production. The university is financially supported by the government whose income comes from tax from the production sectors. Capital accumulation is due to savings by the households and knowledge growth is due to creativity of the three production sectors and the university. We guarantee the existence of long-run equilibria and provide stability conditions. We also examine effects of changes in research policy, creativity of economic activities and scientists, the territorial size, and savings rate upon long-run economic development and the price structure.