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Proteccionism under R&D Policy: Innovation Rate and Welfare

Author

Listed:
  • Felipa de Mello-Sampayo

    (ISCTE-IUL - Department of Economics and UNIDE-ERC)

  • Sofia de Sousa-Vale

    (ISCTE-IUL - Department of Economics and UNIDE-ERC)

  • Francisco Camões

    (ISCTE-IUL - Department of Economics and UNIDE-ERC)

  • Orlando Gomes

    (Instituto Politécnico de Lisboa - Escola Superior de Comunicação Social and UNIDE-ERC)

Abstract

The pressure from national lobbies may lead governments to shift from an optimal into a non-optimal innovation policy. This paper examines the growth and welfare effects of optimal and non-optimal innovation policies. The non-optimal policy corresponds to a subsidy for national innovators that is equivalent to an optimal policy of incentives (tax cuts) to foreign investors. Since we are assessing what can nationals do with the support that could be oriented to foreign firms, we are measuring what the economy loses for not supporting foreign firms. We find welfare loss when supporting national R&D instead of foreign R&D. We conclude that the same support given to innovation can produce strikingly different outcomes depending on who receives the support.

Suggested Citation

  • Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camões & Orlando Gomes, 2010. "Proteccionism under R&D Policy: Innovation Rate and Welfare," Working Papers Series 1 ercwp0210, ISCTE-IUL, Business Research Unit (BRU-IUL).
    • Handle: RePEc:isc:iscwp1:ercwp0210
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    References listed on IDEAS

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    Cited by:

    1. Tomas Havranek & Anna Sokolova, 2016. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 130 Studies Say "Probably Not"," Working Papers 2016/08, Czech National Bank.

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    More about this item

    Keywords

    Endogenous Growth; Foreign Direct Investment; R&D Policy;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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