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Industrial Policy and Firm Heterogeneity

Pedro Barros () and Tore Nilssen ()

Scandinavian Journal of Economics, 1999, vol. 101, issue 4, 597-616

Abstract: Our concern in this paper is with firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises as to which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D technologies in two distinct ways: in the costs of performing R&D activities and in the output obtained from such activities. We find that the optimal firm-specific industrial policy is affected differently by the two sources of firm heterogeneity. Furthermore, a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm. Copyright 1999 by The editors of the Scandinavian Journal of Economics.

Date: 1999
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Working Paper: Industrial policy and firm heterogeneity (1999) Downloads
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