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A politico-economic analysis of the European Union's R&D policy

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  • Chu, Angus C.

Abstract

This paper develops an open-economy growth model to analyze the growth and welfare effects of the European Union's R&D policy. In the case of independent countries, each national government chooses the level of government-funded research non-cooperatively and fails to internalize the spillover effects across countries. Consequently, government-funded research is underprovided. In an economic union, the central government budget causes the common-pool problem and leads to an overprovision of government-funded research. Within this framework, we find that although an economic union dominates independent countries in economic growth, the welfare domination is ambiguous. In particular, there is a critical degree of cross-country spillover above (below) which an economic union dominates (is dominated by) independent countries in social welfare.

Suggested Citation

  • Chu, Angus C., 2009. "A politico-economic analysis of the European Union's R&D policy," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 582-590, December.
    • Handle: RePEc:eee:jmacro:v:31:y:2009:i:4:p:582-590
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    More about this item

    Keywords

    Economic growth Government-funded research Policy coordination;

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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