"at-the-border" and "behind-the-border" policies: What impact on cost-reducing R&D?[Les politiques « à la frontière » et « derrière la frontière »: quel impact sur la R&D réductrice de coût?]

This paper evaluates the impact of various policies on domestic cost-reducing research and development (R&D) expenditures using an international duopolistic model with uncertainty regarding the result of the R&D process. We examine the impact of "at-the-border" policies (import tariffs, import quotas, voluntary export restraints, and minimum price agreements) as well as "behind-the-border" policies (output subsidy, R&D subsidy, public R&D investment). R&D subsidies are appealing policy instruments because they support not only local R&D expenditures but also local production and profits without reducing consumers' surplus. A welfare analysis concludes on the superiority of either production subsidy or import tariff.