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Subsidy Policies and R&D Activities: A Theoretical Analysis

Author

Listed:
  • Manuela Pal

    (Bethune College)

  • Mansh Ranjan Gupta

    (Indian Statistical Institute)

Abstract

We develop a theoretical model of strategic competition between the home firm and the foreign firm in the home market of a less developed country. Both the firms receive subsidy on the R&D activities from their governments. We analyze the properties of optimal subsidy policies of the governemnts of the two countries in the two cases: (i) each of the two governments maximizes her own welfare, (ii) both of them maximize the joint welfare.

Suggested Citation

  • Manuela Pal & Mansh Ranjan Gupta, 2000. "Subsidy Policies and R&D Activities: A Theoretical Analysis," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 35(1), pages 21-40, January.
  • Handle: RePEc:dse:indecr:v:35:y:2000:i:1:p:21-40
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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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