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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 University of Leipzig, Faculty of Economics and Management Science in its series Working Papers with number 97.

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Date of creation: 2011
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Handle: RePEc:zbw:leiwps:97

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Keywords: R&D subsidy; transitional dynamics; semi-endogenous growth; welfare;

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Cited by:
  1. 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.
  2. Elsayyad, May & Konrad, Kai A., 2012. "Fighting Multiple Tax Havens," Munich Reprints in Economics 13964, University of Munich, 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., 2013. "Optimal growth policy: The role of skill heterogeneity," Economics Letters, Elsevier, vol. 119(2), pages 162-164.

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