R&D Subsidies and the Surplus Appropriability Problem

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R&D Subsidies and the Surplus Appropriability Problem

Author Info

Anders SÃ¸rensen (Copenhagen Business School and Centre for Economic and Business Research)

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Anders Sørensen

Abstract

It may be optimal from a welfare perspective to use R&D subsidies when the source of R&D distortions originates from the surplus appropriability problem and technological spillovers in the form of knowledge spillovers, creative destruction, and duplication externalities are absent. Hence, R&D subsidies may constitute the welfare maximizing policy even when subsidies directly targeted on monopoly pricing could be applied. The result holds when dynamic gains are important relative to static gains and when government spending is restricted, i.e., below the required effort for correcting completely for market failures. The argument is developed in a semi-endogenous growth model where the only distortion is monopoly pricing of intermediate goods.

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Article provided by Berkeley Electronic Press in its journal Topics in Macroeconomics.

Volume (Year): 6 (2006)
Issue (Month): 2 ()
Pages: 1346-1346
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Paper
- Sørensen, Anders, 2005. "R&D Subsidies and the Surplus Appropriability Problem," Working Papers 17-2005, Copenhagen Business School, Department of Economics. [Downloadable!]

Find related papers by JEL classification:
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy

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Other versions:
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