According to new growth theory, one way to create additional economic growth is by raising the level of firms' knowledge capit
al. Suppose government policymakers wanted to assist the country in the development of knowledge capital. Which of the following policies would lawmakers not want to use to help in the development of knowledge capital?A. The government could increase the level of funding for research grants to develop additional basic research.B. The government could reduce corporate tax rates for service and retail companies.C. The government could increase the amount of scholarships to allow more people to gain additional training and college education.D. The government could increase resources spent on assisting companies to enforce their patents.
B. The government could reduce corporate tax rates for service and retail companies.
Explanation:
The accumulation of technological capital and knowledge are considered factors that generate increase in the productivity of firms and the economy as a whole. Thus, all policies that encourage the training of labor, as well as the technological development of firms are considered policies conducive to economic growth. Scholarships, patent incentives, and research support fit this type of incentive. However, the mere reduction of fees charged by firms cannot be considered an incentive policy from the perspective of growth theory that considers the accumulation of knowledge as the main aspect of development. Tax reduction is a simple tax policy aimed at increasing firms' competitiveness and increasing sales, but it is not associated with the process of scientific and technological development, as it does not involve the diffusion of knowledge.
