Social Policies and R&D Subsidies : Impact on Inequality, Unemployment and Growth

Purpose: We analyse the impact of different public policies on inequality, unemployment, growth and the tax burden. In this purpose, we build a dynamic general equilibrium model in which growth is driven by endogenous technical progress to analyse the impacts of several policies (Minimum wage; Redistribution and R&D Subsidies financed by an income tax). All policies except pure redistribution are better than non intervention in terms of growth. We distinguish 3 major policy patterns. The Anglo-Saxon model is characterised by high growth, high inequality, low unemployment and a low tax burden. The Nordic Model combines high growth, low inequality and low unemployment, and a high tax burden. The Continental European Model puts together medium inequality and medium tax burden, and higher long term growth is paid for by high unemployment