Agricultural R&D, policies, (in)determinacy, and growth

This paper examines the effects of agricultural subsidy policies on long-run growth. The novelty of this paper lies in its investigation of how the long-run effects of a land productivity conservation subsidy and an agricultural R&D subsidy are affected by the possible emergence of the indeterminacy of equilibria in Rivera-Batiz and Romer's endogenous growth model with elastic labor. The analysis shows that if the technology growth rate is more sensitive to a change in the land productivity conservation subsidy policy than the consumption growth rate, the policy will generally enhance (harm) long-run growth when the balanced growth path is indeterminate (determinate). Furthermore, the agricultural R&D subsidy will enhance (harm) economic growth when the balanced growth path is determinate (indeterminate).