Growth policies' role in the economy

Economic growth comes in several forms, and experts believe it is tied directly to innovation and invention of new products, services and systems that constantly replace outdated ones. This is the view taken by the French economist Philippe Aghion, who built on an older theory by famed Austrian economist Joseph Schumpeter. With growth being an inestimably important driver of the economy, the EU-funded project 'Growth and sustainability policies for Europe' (GRASP) investigated Aghion's version of the Schumpeterian growth approach.

The project considered different layers of policy drivers tied to this concept, which focuses on innovation in imperfectly competitive markets and on the role of technological development. One layer had to do with economic assessments of innovation, including how property rights and incentive issues affect growth. Another investigated structural economic reform and studied various sectors of society, such as infrastructure and education, looking simultaneously at regional policies as well.

A third level explored the dynamics between institutions, drivers of innovation and existing laws to extrapolate their combined impact on economic growth. This also factored in legal, institutional and organisational reforms that can hamper or benefit growth in a myriad of ways. Massive EU research and development efforts in recent decades have also represented a critical aspect of growth in Europe, remaining an important consideration that GRASP also delved into.

Moreover, the project looked at global commitments such as trade policies and environmental commitments, and how they affect economic growth. Yet another important consideration was fiscal policy, examining government finance related to the other components and their effectiveness in contributing to growth.

In summary, GRASP analysed growth-related policies and constructed a full Schumpeterian growth diagnostic to evaluate the adequacy and sustainability of growth in Europe. To achieve these aims the project brought together top-notch researchers and theorists belonging to a variety of disciplines across Europe, ranging from applied econometrics to law and politics. The flow of research and its outcomes delve into the intricacies of growth and the true mechanisms behind it, helping us create better roadmaps for a more prosperous European future.