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Centralized Innovation Policy in an agglomeration and growth model : A welfare analysis

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  • Benjamin Montmartin

    (Université de Lyon, Lyon, F-69007, France ; Université Jean Monnet ; CNRS, GATE Lyon St Etienne, Saint-Etienne, F-42000, France)

Abstract

Innovation policies are strategic tools for reinforcing long-term economic growth. If the literature highlights the need for coordination among national R&D policies, the need for transnational policies appears to be less clear. Using a model à la Martin and Ottaviano (1999), we conduct a welfare analysis in order to judge the effect of a centralized R&D subsidy policy. If theoretical results suggest that this policy can improve efficiency and equity, our welfare analysis shows that when there are few knowledge spillovers between countries, then the policy leads to a conflict of interest. In the case of strong international knowledge spillovers however, the conflict of interest disappears suggesting that innovation policies should first focus on the development of knowledge flows between countries.

Suggested Citation

  • Benjamin Montmartin, 2011. "Centralized Innovation Policy in an agglomeration and growth model : A welfare analysis," Working Papers 1101, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:1101
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    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.
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    Cited by:

    1. Becker, Lasse & Bizer, Kilian, 2015. "Federalism and innovation support for small and medium-sized enterprises: Empirical evidence in Europe," University of Göttingen Working Papers in Economics 245, University of Goettingen, Department of Economics.

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    More about this item

    Keywords

    agglomeration and growth models; innovation policy; welfare criteria;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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