Angus C. Chu

ANGUS C. CHU

Publications

Chu, Angus C. (2008) "Special Interest Politics and Intellectual Property Rights: An Economic Analysis of Strengthening Patent Protection in the Pharmaceutical Industry," Economics & Politics, vol. 20, p. 185-215.

Chu, Angus C. (2007) "Confidence-Enhanced Economic Growth," The B.E. Journal of Macroeconomics: Vol. 7: Iss. 1 (Topics), Article 13. Available at: http://www.bepress.com/bejm/vol7/iss1/art13

Working Papers

Effects of Blocking Patents on R&D: A Quantitative DGE Analysis (January 2008) - Submitted to Journal of Economic Growth

Economic Growth and Patent Policy: Quantifying the Effects of Patent Length on R&D and Consumption (December 2007) - Submitted to Journal of Economic Dynamics and Control

Nation States vs. United Empire: Effects of Political Competition on Economic Growth (April 2008) - Submitted to Journal of Public Economics

Fiscal Centralization versus Decentralization: Growth and Welfare Effects of Leviathan, Spillover, and Tax Competition (July 2008) - joint with Cheng-Chen Yang

Fiscal Centralization and Tragedy of the Commons in an Endogenous-Growth Model: A Differential-Game Approach (coming soon) - joint with Cheng-Chen Yang

Abstract: This paper considers the growth and welfare effects of fiscal decentralization (FD) versus fiscal centralization (FC). Under FD, local public goods are underprovided due to positive spillovers. Under FC, the centralized budget constraint induces the Leviathan politicians from different districts to behave non-cooperatively and extract an excessive amount of tax revenue for self-consumption (i.e. a tragedy of the commons). The strategic interaction between politicians is modeled as a differential game. We first show that there is an important difference between the Markov perfect equilibrium (MPE) and the open-loop equilibrium under FC. Then, we explore the growth and welfare effects in the MPE as the degree of spillovers, of Leviathan and the number of districts vary. It is shown that FD always dominates FC in economic growth. As for welfare effects, there exists a cutoff value for the degree of spillovers such that if and only if the degree of spillovers is below this threshold, then FD dominates FC in social welfare. Furthermore, this threshold is increasing in the degree of Leviathan and the number of districts.

Special Interest Politics and R&D Tax Credit: A Political-Economic Analysis (coming soon)

Abstract: In the United States, special interest groups and R&D-intensive corporations have been lobbying the government on the issues of strengthening and extending the R&D tax credit. What are the welfare implications of a lobbying-driven increase in R&D tax credit? This paper develops an open-economy R&D endogenous-growth model with special interest politics and analyzes the conditions under which a lobbying-driven increase in R&D subsidies would improve social welfare. The Nash-equilibrium level of R&D subsidies chosen by non-cooperative governments features multiple externalities: (a) a business-stealing effect; (b) technology spillovers; (c) a dividend-income externality; and (d) a tax-burden externality. The relative importance of these externalities is governed by two parameters: (i) the degree of home bias in asset holding; and (ii) the elasticity of substitution between home and foreign goods. When the business-stealing effect is absent or dominated by the positive externalities, the level of R&D subsidies would be sub-optimally low in the Nash equilibrium and the special interest groups lobbying the governments to increase R&D subsidies in the political equilibrium may improve global welfare.

Links