AbstractThis paper presents a model to explain why both industry leaders and follower firms often invest in R&D and explores the welfare implications of these R&D investment choices. Regardless of initial conditions, the equilibrium path in this model involves gradually convergence to a balanced growth path and R&D subsidies have no effect on the balanced growth rate. Nevertheless, it is always optimal for the government to intervene by subsidizing the R&D expenditures of industry leaders and taxing the R&D expenditures of follower firms. Without government intervention, market forces generate too much creative destruction.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 524.
Length: 38 pages
Date of creation: 12 Dec 1999
Date of revision:
Publication status: Published in International Economic Review, 2007, pages 247-280.
Contact details of provider:
Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
Economic growth; R&D;
Other versions of this item:
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-24 (All new papers)
- NEP-DEV-2000-01-24 (Development)
- NEP-IND-2000-01-24 (Industrial Organization)
- NEP-INO-2000-01-24 (Innovation)
- NEP-TID-2000-01-24 (Technology & Industrial Dynamics)
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