Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D Subsidies
AbstractWe consider in this paper a duopoly competing in quantities and where�firms can invest in R&D to control their emissions. We distinguish between effort carried out to acquire first-hand knowledge (original R&D)and effort to develop an absorptive capacity to be able to capture part of the knowledge developed by rival. There are also free R&D spillovers between firms. We show that a regulator can reach the social optimal outcome by implementing a taxation and subsidy policy. The regulator subsidizes at a higher rate original R&D effort than its absorptive capacity counterpart when the free spillovers are high, and the contrary may occur when the free spillovers are low. When the cost of original research is lower than the one of absorptive research, or when the learning parameter of the latter is low, then the socially optimal level of original research is higher than the one of absorptive capacity. We have the opposite result when the cost of absorptive capacity is lower than the one of original research and when the learning parameter is high.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16984.
Date of creation: Jun 2009
Date of revision: Aug 2009
Pollution Control; Original R&D; Absorptive Capacity; Taxes and Subsidies; Social Optimum;
Other versions of this item:
- 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.
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-05 (All new papers)
- NEP-ENE-2009-09-05 (Energy Economics)
- NEP-ENV-2009-09-05 (Environmental Economics)
- NEP-INO-2009-09-05 (Innovation)
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