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A politico-economic analysis of the European Union's R&D policy

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  • Chu, Angus C.

Abstract

This paper develops an open-economy growth model to analyze the growth and welfare effects of the European Union's R&D policy. In the case of independent countries, each national government chooses the level of government-funded research non-cooperatively and fails to internalize the spillover effects across countries. Consequently, government-funded research is underprovided. In an economic union, the central government budget causes the common-pool problem and leads to an overprovision of government-funded research. Within this framework, we find that although an economic union dominates independent countries in economic growth, the welfare domination is ambiguous. In particular, there is a critical degree of cross-country spillover above (below) which an economic union dominates (is dominated by) independent countries in social welfare.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 4 (December)
Pages: 582-590

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Handle: RePEc:eee:jmacro:v:31:y:2009:i:4:p:582-590

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Economic growth Government-funded research Policy coordination;

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  1. Jonathan Eaton & Eva Gutierrez & Samuel Kortum, 1998. "European technology policy," Economic Policy, CEPR & CES & MSH, vol. 13(27), pages 403-438, October.
  2. Chu, Angus C., 2007. "Special Interest Politics and Intellectual Property Rights: An Economic Analysis of Strengthening Patent Protection in the Pharmaceutical Industry," MPRA Paper 4349, University Library of Munich, Germany.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  4. Bradbury, John Charles & Crain, W. Mark, 2001. "Legislative organization and government spending: cross-country evidence," Journal of Public Economics, Elsevier, vol. 82(3), pages 309-325, December.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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