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Dynamically Optimal R\& D Subsidization

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  • Grossmann, Volker
  • Steger, Thomas M.
  • Trimborn, Timo

Abstract

Previous research on optimal R\& D subsidies has focussed on the long run. This paper characterizes the optimal time path of R\& D subsidization in a semi- endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R\& D subsidization in the US, the R\& D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R\& D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented.

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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-453.

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Length: 33 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:han:dpaper:dp-453

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Keywords: R\& D subsidy; Transitional dynamics; Semi-endogenous growth; Welfare;

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Citations

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Cited by:
  1. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, vol. 86(2), pages 295-305.
  2. Prettner, Klaus & Werner, Katharina, 2014. "Human capital, basic research, and applied research: Three dimensions of human knowledge and their differential growth effects," Center for European, Governance and Economic Development Research Discussion Papers 186, University of Goettingen, Department of Economics.
  3. Grossmann, Volker & Steger, Thomas M. & Trimborn, Timo, 2011. "The macroeconomics of TANSTAAFL," Working Papers 101, University of Leipzig, Faculty of Economics and Management Science.
  4. Grossmann, Volker & Steger, Thomas M., 2012. "Optimal growth policy: The role of skill heterogeneity," Working Papers 117, University of Leipzig, Faculty of Economics and Management Science.

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