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Dynamically Optimal R&D Subsidization

  • Volker Grossmann
  • Thomas Steger
  • Timo Trimborn

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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-08/cesifo1_wp3153.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3153.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3153
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