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Dynamically optimal R&D subsidization

Author Info

  • Grossmann, Volker
  • Steger, Thomas M.
  • Trimborn, Timo

Abstract

Previous research on optimal R&D subsidies has focussed on the long run. This paper characterizes the optimal time path of R&D subsidization in a semi-endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented.

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Paper provided by University of Leipzig, Faculty of Economics and Management Science in its series Working Papers with number 97.

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Date of creation: 2011
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Handle: RePEc:zbw:leiwps:97
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Keywords: R&D subsidy; transitional dynamics; semi-endogenous growth; welfare;

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Find related papers by JEL classification:
  • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
  • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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Cited by:

  1. Volker Grossmann & Thomas Steger & Timo Trimborn, 2011. "The Macroeconomics of TANSTAAFL," CESifo Working Paper Series 3651, CESifo Group Munich.
  2. May Elsayyad & Kai A. Konrad, 2011. "Fighting Multiple Tax Havens," Working Papers fighting_multiple_tax_hav, Max Planck Institute for Tax Law and Public Finance.
  3. Werner, Katharina & Prettner, Klaus, 2014. "Human capital, basic research, and applied research: three dimensions of human knowledge and their differential growth effects," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100448, Verein für Socialpolitik / German Economic Association.
  4. Elsayyad, May & Konrad, Kai A., 2012. "Fighting Multiple Tax Havens," Munich Reprints in Economics 13964, University of Munich, Department of Economics.
  5. Gómez, Manuel A. & Sequeira, Tiago N., 2014. "Should the US streamline its tax system? Analysis on an endogenous growth model," Economic Modelling, Elsevier, vol. 37(C), pages 113-119.
  6. Grossmann, Volker & Steger, Thomas M., 2012. "Optimal growth policy: The role of skill heterogeneity," Working Papers 117, University of Leipzig, Faculty of Economics and Management Science.

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