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Three essays on welfare implications of R&D policies in the presence of spillovers

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  • Kim, Jeong-Eon

Abstract

This dissertation consists of three essays investigating welfare implications of R&D policies in the presence of spillovers.;The first essay examines the policy implications of a research joint venture (RJV) while introducing endogenous spillovers and costly RJV. The research joint venture is costly in the sense that the firms incur two kinds of costs when they join in an RJV: RJV formation costs and spillover costs. RJV formation costs are modeled as fixed while spillover costs increase with the amounts of information sharing within an RJV. We derive the condition under which firms do not have an incentive to form an RJV, and identify when firms within an RJV share information completely. This essay also finds that private interests with an RJV are not consistent with public interests for a wide range of RJV formation costs, which suggests the potential need for active government intervention with respect to RJV formation.;The second essay investigates the welfare effects of intellectual property rights (IPR) protection in terms of north-south trade. It asks which southern countries, if any, should provide more IPR protection, assuming that the differentiated IPR protection among southern countries can be made through a WTO (World Trade Organization) agreement. Only the northern country innovates, and n-1 southern countries have different capacities to absorb knowledge from the northern innovations. The outcome of innovations reduces the unit production cost of the northern firm, and also provides benefits to the southern firms through spillovers. This essay shows that the southern countries can be classified into three groups in terms of the welfare effects of spillovers. The countries in the first group are better off from relaxed IPR protection both in their own countries and in the other countries. The countries in the second group are better off from spillovers in their country, but worse off from spillovers in the other group. The third group suffers from welfare loss whenever IPR protection is relaxed in any southern country. The northern country is worse off by relaxed IPR protection in any southern country for wide ranges of R&D efficiency and the sum of spillovers.;The last essay combines the analysis of the R&D cooperation with the strategic trade policy theory. Endogenizing spillovers (information sharing) within an RJV, it identifies when the RJV works as a tool of strategic trade policy, and provides its welfare implications. Many results obtained in the third market structure become reversed in the integrated market structure. In the situation where only the home country allows an RJV formation while the foreign country does not, allowing an RJV benefits the home country in the third market structure, but it hurts the home country in the case of integrated market structure if spillover costs are sufficiently high. We also identify the Nash equilibria of the policy game in which both the home and the foreign countries simultaneously decide whether to allow an RJV or not, and investigate the welfare implications when both the home and the foreign countries allow an RJV formation in each country. (Abstract shortened by UMI.)

Suggested Citation

  • Kim, Jeong-Eon, 2003. "Three essays on welfare implications of R&D policies in the presence of spillovers," ISU General Staff Papers 200301010800001597, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genstf:200301010800001597
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