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Welfare-reducing discriminatory output subsidies with mixed ownership and R&D

Author

Listed:
  • Jiaqi Chen

    (Chonnam National University)

  • Sang-Ho Lee

    (Chonnam National University)

  • Timur K. Muminov

    (Management Development Institute of Singapore in Tashkent)

Abstract

This study examines the welfare-reducing effect of time-consistent discriminatory output subsidies under duopolistic R&D competition with a semi-public firm. Contrary to the committed case with mixed ownership, we find that the private firm invests more in R&D than the semi-public firm to induce the government to grant higher subsidy, which results in higher output production than the semi-public firm. We also show that optimal discriminatory subsidy rates are higher (lower) than uniform subsidy rates for a sufficiently high (low) degree of privatization, which could decrease (increase) social welfare.

Suggested Citation

  • Jiaqi Chen & Sang-Ho Lee & Timur K. Muminov, 2021. "Welfare-reducing discriminatory output subsidies with mixed ownership and R&D," Economics Bulletin, AccessEcon, vol. 41(3), pages 1592-1602.
    • Handle: RePEc:ebl:ecbull:eb-21-00061
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    File URL: http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I3-P135.pdf
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    Cited by:

    1. Jiaqi Chen & Doori Kim & Sang‐Ho Lee, 2024. "Endogenous timing of R&D decisions with spillovers: Output versus research subsidies," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 631-649, July.

    More about this item

    Keywords

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    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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