IDEAS home Printed from https://ideas.repec.org/a/pcp/pucrev/y2019i84p9-35.html
   My bibliography  Save this article

Subsidiar innovación y producción

Author

Listed:
  • Gamal Atallah

    ( Departamento de Economía, Universidad de Ottawa. Canadá)

Abstract

This paper studies the interaction between production subsidies and innovation subsidies. Wedevelop a model which allows us to calculate the socially optimal subsidies (and how they varywith changes in the economic environment), and to understand how firms react to each type ofsubsidy. In a three-stage game, the government chooses production and innovation subsidies inthe first stage to maximize welfare in the presence of a shadow cost of public funds; two firmsinvest in cost-reducing R&D in the second stage; and the two firms compete in quantities in thelast stage. we find that production subsidies crowd out innovation. On the other hand, providinga production subsidy reduces the cost of the innovation subsidy, and vice versa. The optimalproduction subsidy either increases monotonically with spillovers, or is U-shaped with respect tospillovers, depending on exogenous parameters. The innovation subsidy is increasing in spillovers. The production subsidy is higher for very low spillovers, while the innovation subsidy is higher formoderate/high spillovers. In equilibrium, because of the innovation subsidy, R&D increases withspillovers, and so does welfare. We also consider the case of a financially constrained government,as well as the case of a uniform subsidy to production and innovation costs.

Suggested Citation

  • Gamal Atallah, 2019. "Subsidiar innovación y producción," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 42(84), pages 9-35.
  • Handle: RePEc:pcp:pucrev:y:2019:i:84:p:9-35
    as

    Download full text from publisher

    File URL: http://revistas.pucp.edu.pe/index.php/economia/article/view/21400
    Download Restriction: no

    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Lee, Sang-Ho & Muminov, Timur K. & Tomaru, Yoshihiro, 2017. "Partial Privatization And Subsidization In A Mixed Duopoly: R&D Versus Output Subsidies," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 58(2), pages 163-177, December.
    3. Gamal Atallah, 2014. "Conditional R&D subsidies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(2), pages 179-214, March.
    4. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
    5. Christopher A. Laincz & Joshua D. Hall, 2012. "Optimal R&D Subsidies with Heterogeneous Firms in a Dynamic Setting," DEGIT Conference Papers c017_040, DEGIT, Dynamics, Economic Growth, and International Trade.
    6. José Ángel Zúñiga-Vicente & César Alonso-Borrego & Francisco J. Forcadell & José I. Galán, 2014. "Assessing The Effect Of Public Subsidies On Firm R&D Investment: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 28(1), pages 36-67, February.
    7. Sajal Lahiri & Yoshiyasu Ono, 1999. "R&D Subsidies Under Asymmetric Duopoly: A Note," The Japanese Economic Review, Japanese Economic Association, vol. 50(1), pages 104-111, March.
    8. Anna Stepanova, 2009. "R&D Spillovers, Concentration and Market Performance," Studies in Economics 0901, School of Economics, University of Kent.
    9. Vasileios Zikos, 2007. "A Reappraisal of the Irrelevance result in mixed duopoly: A note on R&D competition," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-6.
    10. Dominique Guellec, 2001. "Les politiques de soutien à l'innovation technologique à l'aune de la théorie économique," Economie & Prévision, La Documentation Française, vol. 0(4), pages 95-105.
    11. Hall, Joshua & Laincz, Christopher, 2012. "Optimal R&D Subsidies with Heterogeneous Firms in a Dynamic Setting," School of Economics Working Paper Series 2012-13, LeBow College of Business, Drexel University.
    12. Emmanuel Petrakis & Joanna Poyago‐Theotoky, 2002. "R&D Subsidies versus R&D Cooperation in a Duopoly with Spillovers and Pollution," Australian Economic Papers, Wiley Blackwell, vol. 41(1), pages 37-52, March.
    13. Parish, Ross M. & McLaren, Keith Robert, 1982. "Relative Cost-Effectiveness Of Input And Output Subsidies," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 26(1), pages 1-13, April.
    14. Kesavayuth, Dusanee & Zikos, Vasileios, 2013. "R&D versus output subsidies in mixed markets," Economics Letters, Elsevier, vol. 118(2), pages 293-296.
    15. Dominique Guellec, 2001. "Les politiques de soutien à l'innovation technologique à l'aune de la théorie économique," Économie et Prévision, Programme National Persée, vol. 150(4), pages 95-105.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Production subsidy; Input subsidy; Output subsidy; Innovation subsidy; R&D subsidy; R&D; R&D spillovers; Process innovation.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pcp:pucrev:y:2019:i:84:p:9-35. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/depucpe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.