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Optimal Technology Policy with Imitation and Risk-Averting Households

Author

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  • Tapio Palokangas

Abstract

A Schumpeterian growth model is constructed where R&D firms innovate to produce better versions of the products or imitate to copy existing innovations. Because firms cannot use their innovations or imitations as collateral, they finance their investment by issuing shares. Households save by purchasing these shares. The government affects the level of profits through competition policy. The main findings are the following. A small imitation subsidy slows down growth. In the first-best optimum collusion is socially optimal, but when the government cannot discriminate between innovation and imitation, it should promote product market competition.

Suggested Citation

  • Tapio Palokangas, 2005. "Optimal Technology Policy with Imitation and Risk-Averting Households," DEGIT Conference Papers c010_011, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c010_011
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    File URL: http://degit.sam.sdu.dk/papers/degit_10/C010_011.pdf
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    References listed on IDEAS

    as
    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Zeng, Jinli, 2001. "Innovative vs. imitative R&D and economic growth," Journal of Development Economics, Elsevier, vol. 64(2), pages 499-528, April.
    3. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 467-492.
    4. Mukoyama, Toshihiko, 2003. "Innovation, imitation, and growth with cumulative technology," Journal of Monetary Economics, Elsevier, vol. 50(2), pages 361-380, March.
    5. Cheng, Leonard K & Tao, Zhigang, 1999. "The Impact of Public Policies on Innovation and Imitation: The Role of R&D Technology in Growth Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 187-207, February.
    6. Vesa Kanniainen & Rune Stenbacka, 2000. "Endogenous Imitation and Implications for Technology Policy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(2), pages 360-360, June.
    7. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
    8. Carl Davidson & Paul Segerstrom, 1998. "R&D Subsidies and Economic Growth," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 548-577, Autumn.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Innovation; Imitation; Endogenous growth; Technology policy;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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