Innovation economy, productive public expenditure and economic growth

Abstract

Multidisciplinary innovation is the main engine of growth for an increasing number of economies. Innovation requires the participation of and interaction between all economic agents. It also requires public spending on education, research and infrastructures. Our main goal is to emphasize the government’s role in a growing innovation economy. Developing a non-scale, idea-based, one-sector growth model with complementarities and productive public expenditure, we analyse theoretically the growth effects of an increase in productive public expenditure, which we find positive in the short, medium and long run.