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On R&D and the undersupply of emerging versus mature technologies

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    An important policy question is whether research and development (R&D) in new, emerging technologies should be more subsidized than R&D in other more mature technologies. In this paper I analyze if innovation externalities caused by knowledge spillovers from private firms may warrant a differentiated R&D policy. I find that R&D in emerging and mature technologies should not be subsidized equally. The reason is that R&D in the two technologies is not equally undersupplied in the market due to differences in their knowledge stocks. R&D in the mature technology should be subsidized more when the sum of the output elasticities with respect to labor and knowledge in R&D production is high, while R&D in the emerging technology should be subsidized more when the elasticities are low.

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    File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp571.pdf
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    Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 571.

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    Date of creation: Dec 2008
    Handle: RePEc:ssb:dispap:571
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