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International Competition And U.S. R&D Subsidies: A Quantitative Welfare Analysis

  • Giammario Impullitti

In the early 1970s U.S. firms were the uncontested world leaders in R&D investment in most manufacturing sectors. Later, led by Japan and Europe, foreign firms began to challenge American R&D leadership in many sectors of the economy. This period of increasing technological competition is contemporaneous with a substantial increase in U.S. R&D subsidies. What is the effect of the observed increase in international competition on U.S. welfare? How does foreign competition affect the optimal R&D subsidy in the United States, and, consequently, how far is this from the subsidy observed in the data? This article addresses these questions in a two-country quality ladder growth model.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 51 (2010)
Issue (Month): 4 (November)
Pages: 1127-1158

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Handle: RePEc:ier:iecrev:v:51:y:2010:i:4:p:1127-1158
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