Government spending should be regarded as a social and political phenomenon, not merely as a technical choice. We argue that there is an implicit contract between the organized elites and politicians which often leads to a pro-elite allocation of public resources. A natural and simple taxonomy...

The paper develops a dynamic general-equilibrium model of Schumpeterian growth which is fueled by industrial and agricultural R&D. The former is private and results in better production processes, whereas the latter is government-financed (public and applied) R&D and generates better crop...