Cost-Reducing R&D with Spillovers and Trade - 10.1628/093245611796589997 - Mohr Siebeck

Rajeev K. Goel, Shoji Haruna

Cost-Reducing R&D with Spillovers and Trade

Volume 167 () / Issue 2, pp. 314-326 (13)

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This article incorporates research spillovers and examines behavior of firms in a two-stage, international trade game with process innovation. Governments choose optimal research subsidies in stage 1, and firms take account of the subsidies in choosing research and production in stage 2. Results show that optimal research subsidies differ under spillovers and no spillovers. Strategic responses to foreign research subsidies uniquely occur in cases with spillovers. At certain spillover levels, the optimal R&D policy is a negative subsidy (tax). Findings regarding the effects of trade liberalization support earlier results with perfect appropriability, although the responses to trade liberalization are different with spillovers.

Rajeev K. Goel No current data available.

Shoji Haruna No current data available.