R&D policies, endogenous growth and scale effects

Fuat Sener

Journal of Economic Dynamics and Control, 2008, vol. 32, issue 12, 3895-3916

Abstract: This paper constructs a scale-free endogenous growth model and studies the determinants of optimal R&D policy. The model combines two of the main approaches to removal of scale effects: the rent protection approach and the diminishing technological opportunities approach. The steady-state rate of innovation is a function of all of the model's parameters including the R&D subsidy/tax rate. Thus, growth is fully endogenous. Numerical simulations imply that it is optimal to tax R&D when innovations are of very small and very large magnitudes, and to subsidize R&D when innovations are of medium size. Under a wide range of empirically relevant calibrations, the subsidy rate turns out to be positive and fluctuates between 5% and 25%.

Keywords: Scale; effects; Innovation; Rent; protection; Technological; change (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:32:y:2008:i:12:p:3895-3916

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