Capital allowances are another effective way to boost manufacturing. For example, government can introduce a 100% first year capital allowance for investment in plant and machinery, which will significantly affect technological progress in a business.
Taxation is another policy lever through which government policy can affect productivity growth and economic performance. Tax incentive can be introduced, which will focus on direct equity investment by individuals. For example, the scheme can be introduced, which would be designed to pay for employee's retirement. Stamp duty on share dealings could also be removed or reduced for smaller companies, which will improve the flow of capital to smaller businesses, as well as promoting the use of share incentives for employees.
To sum up, in endogenous growth model, productivity growth results from spillovers from human capital accumulation or inventive activity and this is what generates long-run growth in per capita income.
…
