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Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D Subsidies

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  • Ben Youssef, Slim
  • Zaccour, Georges

Abstract

In this paper, we consider a duopoly competing on quantity, where firms can invest in R&D to control their emissions. We distinguish between efforts carried out to acquire first-hand knowledge (inventive R&D) and efforts made to develop an absorptive capacity to be able to capture part of the knowledge developed by the rival. There are also free R&D spillovers between firms. To reach the first best outcome, the regulator uses three instruments, namely, a per-unit emissions tax, a per-unit inventive-research subsidy, and a per-unit absorptive-research subsidy. The socially optimal investment cost in inventive R&D is always higher than that in absorptive R&D. Interestingly, when the free spillover is high enough, the regulator gives a greater per-unit subsidy for inventive research, and when it is low enough and the marginal damage cost of pollution is sufficiently high, the regulator supports absorptive research to strengthen R&D spillovers. Moreover, inventive research is actually taxed when the free spillover is low and the marginal damage cost of pollution is high.

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  • Ben Youssef, Slim & Zaccour, Georges, 2014. "Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D Subsidies," Strategic Behavior and the Environment, now publishers, vol. 4(1), pages 41-58, April.
  • Handle: RePEc:now:jnlsbe:102.00000043
    DOI: 10.1561/102.00000043
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    Cited by:

    1. Bondarev, Anton & Greiner, Alfred, 2018. "Catching-up and falling behind: Effects of learning in an R&D differential game with spillovers," Journal of Economic Dynamics and Control, Elsevier, vol. 91(C), pages 134-156.
    2. Bondarev, Anton, 2018. "Robust policy schemes for R&D games with asymmetric information," Working papers 2018/01, Faculty of Business and Economics - University of Basel.
    3. Ben Youssef, Slim & Dinar, Zeineb, 2009. "Régulation d'un duopole et R&D environnementale [Regulation of a duopoly and environmental R&D]," MPRA Paper 20596, University Library of Munich, Germany, revised Feb 2010.
    4. Ben Youssef, Slim, 2009. "Transboundary Pollution and Absorptive Capacity," MPRA Paper 17158, University Library of Munich, Germany.
    5. Anton Bondarev, 2019. "Robust Policy Schemes for Differential R&D Games with Asymmetric Information," Dynamic Games and Applications, Springer, vol. 9(2), pages 391-415, June.
    6. Zeineb Dinar, 2014. "Transboundary Pollution, R&D Spillovers, Absorptive Capacity and International Trade," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 501-513.
    7. Bondarev, Anton & Krysiak, Frank C., 2017. "Temporary and permanent technology lock-ins in the quality-differentiated Bertrand competition," Working papers 2017/09, Faculty of Business and Economics - University of Basel.
    8. Dinar, Zeineb, 2013. "Transboundary pollution, R&D spillovers, absorptive capacity and international trade," Economics Discussion Papers 2013-23, Kiel Institute for the World Economy (IfW Kiel).
    9. Anton Bondarev & Frank C. Krysiak, 2017. "Robust policy schemes for R&D games with asymmetric information," Working papers 2017/14, Faculty of Business and Economics - University of Basel.

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    More about this item

    Keywords

    Pollution control; inventive R&D; absorptive capacity; taxes and subsidies; first best;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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