This paper presents a second-generation schumpeterian growth model to investigate the existence of possible links between firm's size, competition stiffness and the effectiveness of R&D policy. In the model, the step size of innovation is randomly drawn from a Pareto distribution, and firms are heterogeneous in terms of market power. The paper finds that the optimal R&D policy is to subsidise R&D and not to tax it, and that more intense competition enlarges the gap between free-market R&D investment and the optimal outcome. However, the paper also finds that the short-run impact on welfare of R&D policy is always negative, and that the recovery time of the welfare loss as a result of the subsidy is negatively related to firm's market power.
R&D policy and competition in a schumpeterian growth model with heterogeneous firms / Parello, Carmelo Pierpaolo. - In: OXFORD ECONOMIC PAPERS. - ISSN 1464-3812. - STAMPA. - 1:71(2019), pp. 1-187. [10.1093/oep/gpy018]
R&D policy and competition in a schumpeterian growth model with heterogeneous firms
Carmelo Pierpaolo Parello
2019
Abstract
This paper presents a second-generation schumpeterian growth model to investigate the existence of possible links between firm's size, competition stiffness and the effectiveness of R&D policy. In the model, the step size of innovation is randomly drawn from a Pareto distribution, and firms are heterogeneous in terms of market power. The paper finds that the optimal R&D policy is to subsidise R&D and not to tax it, and that more intense competition enlarges the gap between free-market R&D investment and the optimal outcome. However, the paper also finds that the short-run impact on welfare of R&D policy is always negative, and that the recovery time of the welfare loss as a result of the subsidy is negatively related to firm's market power.File | Dimensione | Formato | |
---|---|---|---|
Parello_ReD_2019.pdf
solo gestori archivio
Tipologia:
Versione editoriale (versione pubblicata con il layout dell'editore)
Licenza:
Tutti i diritti riservati (All rights reserved)
Dimensione
217.48 kB
Formato
Adobe PDF
|
217.48 kB | Adobe PDF | Contatta l'autore |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.