Globally Optimal R&D Subsidy Policy: an Economist’s View on the WTO Subsidy Agreement

Moonsung Kang ()
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Moonsung Kang: Korea University, Postal: Assistant Professor, Division of International Studies, Korea University, 5-1 Anam-dong, Sungbuk-Gu, Seoul, 136-701, Korea

Journal of Economic Integration, 2008, vol. 23, 346-359

Abstract:

We provide economic backgrounds to the Agreement on Subsidies and Countervailing Measures under the World Trade Organization. Permitting R&D subsidy under Article 8 of the Agreement can be interpreted as an inefficient victory of an individual exporting country in the non-cooperative game, harnessing strategic relationship over a foreign rival firm into its domestic industrial policy. In addition, we show that the expiration of Article 8 can be understood as a result of the global optimum, where we maximize the sum of welfares over exporting and importing countries in the symmetric case with a linear demand.

Keywords: Strategic Trade Policy; R&D subsidies; WTO (search for similar items in EconPapers)
JEL-codes: F10 F13 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0437

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