Pintu Parui

We propose a generalized R&D-based economic growth model that incorporates endogenous human capital accumulation in terms of education and health and the public provision of healthcare and basic science. The government taxes households to pay for healthcare personnel and basic researchers. These employees are not anymore available for applied research and for final goods production. Thus, important tradeoffs emerge for economic growth and welfare with respect to government spending policies. While increasing public spending on health and basic research may decrease economic growth and welfare in the short run, we show that they foster economic growth in the medium run and tend to raise long-run welfare when compared to actual levels of spending in Organisation for Economic Co-operation and Development (OECD) countries. In addition, since public funding for healthcare tends to be rather high in most rich countries, the overall public spending shortfall is lower than previous research has shown. Our results highlight the importance of understanding the tradeoffs involved when deciding adequate public funding for healthcare and basic research.

In a neo‐Kaleckian growth‐model, we endogenize the dividend rate and corporate debt in the long run and investigate the possibility of multiple equilibria and instability in the economy. We find that the economy is in a wage‐led demand and debt‐burdened growth regime. However, both debt‐led and debt‐burdened demand regimes are possible. In some instances, the speed of the adjustment parameter related to the dividend dynamics plays a crucial role in stabilizing the economy. Otherwise, the economy may lose its stability and gives birth to limit cycles. A rise in the floor level of the targeted dividend–capital ratio has a destabilizing effect on the economy. The same is true for a rise in the interest rate. Moreover, a significant rise in the interest rate may cause instability in the economy. Therefore, a lower value of the floor level of the targeted dividend–capital ratio and a lower level of interest rate are desirable for promoting stability in the economy.

Motivated by the prevailing severe situation in India, we extend the SIR(S) model of infectious diseases to incorporate demand dynamics and its interaction with COVID-19 spread. We argue that, on one hand, the spread of COVID-19 creates panic among consumers and firms and negatively affects economic activity. On the other hand, economic activity intensifies the spread of the infection. Initially assuming that recovered individuals do not develop antibodies and become susceptible again, we capture the interaction between economic activity and the spread of the disease in a two-dimensional dynamical system. We show that a large fiscal expansion combined with measures to boost community health and improve the health sector's capacity to provide critical care can simultaneously improve the economy and control the spread of the disease. Finally, assuming that only a fraction of recovered individuals become susceptible to contracting the diseases again, we obtain richer dynamics in a three-dimensional dynamical system. This paper also highlights the important role of infection rates and the recovery rate in determining the uniqueness and the stability properties of steady state.

In a post-Keynesian growth model with positive saving propensity out of wages, this paper analyses the implication of different kinds of government expenditures on aggregate demand and economic growth. We distinguish between government expenditure on consumption and investment. The basic idea is that certain kinds of government investment expenditure influences labour productivity. In a formal model, we incorporate this idea by assuming labour productivity as an increasing function of government investment expenditure. When the economy is in a profit-led demand regime, under the balanced budget assumption, we show that a shift in government expenditure from consumption to investment leads to an unambiguous rise in both aggregate demand and economic growth. However, the result is ambiguous in the wage-led demand regime. Once the balanced budget assumption is dropped, while in a wage-led demand regime a rise in government investment expenditure may decrease aggregate demand and growth, it unambiguously raises both aggregate demand and growth in a profit-led demand regime. On the other hand, in the absence of a balanced budget assumption, a rise in government consumption expenditure has a positive effect in both regimes. We also show that allowing the government to run a deficit and incur debt does not necessarily lead to the public debt rising without bounds.