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Author: | Leahy, D. Neary, J. P. |
Title: | R & D spillovers and the case for industrial policy in an open economy |
Journal: | Oxford Economic Papers
1999 : JAN, VOL. 51:1, p. 40-59 |
Index terms: | R&D Subsidies Industrial policy Economic theory |
Language: | eng |
Abstract: | In this paper, the case of subsidies towards firms is considered which generate R&D spill-overs in open economies. It is shown that in the presence of strategic behavior by firms, many expected results are overturned. Local R & D spill-overs to other domestic firms may justify an R & D tax rather than a subsidy. R & D cooperation by local firms over-internalizes the externality and also justifies an R & D tax, and international spill-overs which benefit foreign firms may justify a subsidy, even though the government cares only about the profits of home firms. |
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