Stimulating Long-Term Growth and Welfare in the U.S.
CESifo, Munich, 2023
CESifo Working Paper No. 10658
![](https://cesifo.org/DocImg/cesifo1_wp10658.jpg?c=1695644111)
We develop an endogenous growth model to quantify how permanent structural policy changes that enhance the fiscal policy mix, markets’ functioning, and public institutions’ quality affect long-term growth and welfare. The reforms include increased public investment, reduced market power through lower price markups for patents and intermediate goods, and an improved institutional framework that reduces rent-seeking. All reforms, except lower patent prices, lead to per-capita output and welfare gains along the transition and balanced growth paths. In contrast, a lower markup in the research sector hurts innovation, leading to lower growth over both paths and welfare losses along the transition.
Fiscal Policy, Macroeconomics and Growth