R&D Subsidies and Economic Growth
AbstractWe present an endogenous growth model in which some firms devote resources to developing higher-quality products (innovative R&D) and other firms devote resources to copying these products (imitative R&D). Although consumers benefit from the knowledge created by both types of R&D activities, only innovative R&D subsidies lead to faster economic growth; imitative R&D subsidies actually lead to slower economic growth. A key assumption driving these conclusions is that R&D activities are subject to decreasing returns. When R&D activities are subject to constant returns, as is commonly assumed, the only equilibrium with both innovation and imitation is unstable.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 29 (1998)
Issue (Month): 3 (Autumn)
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Web page: http://www.rje.org
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- Segerstrom, Paul S., 1998.
"The Long-Run Growth Effects of R&D Subsidies,"
Working Paper Series
506, Research Institute of Industrial Economics.
- Wang, Vey & Lai, Chung-Hui, 2010. "Franchise Fee, Tax/Subsidy Policies and Economic Growth," MPRA Paper 27745, University Library of Munich, Germany.
- Fidel Pérez Sebastián, 2001. "Growth And Public Support To Innovation And Imitation," Working Papers. Serie AD 2001-31, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 43.
- Marta Aloi & Laurence Lasselle, 2001. "Growing through Subsidies," Discussion Paper Series, Department of Economics 200109, Department of Economics, University of St. Andrews.
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