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Author: | Engers, M. Mitchell, S. K. |
Title: | R&D policy with layers of economic integration |
Journal: | European Economic Review
2006 : OCT, VOL. 50:7, p. 1791-1815 |
Index terms: | R&D subsidies integration international models |
Freeterms: | spillovers |
Language: | eng |
Abstract: | This paper investigates whether the optimal unilateral R&D policy for an open economy is a subsidy or a tax. A general equilibrium model with 3 successive layers of international integration is built: a. trade in goods, b. trade in technologies (here as: techs.) with international R&D spillovers and c. internationally-coordinated R&D policy. Trade in techs. introduces the possibility that an R&D subsidy will have such strong, negative terms-of-trade effects that it harms domestic (here as: dom.) welfare. It is shown by numerical simulations of the OECD that this is a possibility for the U.S. and Japan. With international R&D spillovers a dom. R&D subsidy may reduce dom. innovation. |
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