Centralized R&D Subsidy Policy in an NEGG Model: A Welfare Analysis

Benjamin Montmartin

Recherches économiques de Louvain, 2013, vol. 79, issue 1, 5-34

Abstract: Since the Lisbon agenda (2000), European policies are increasingly oriented towards R&D and innovation. In this context, we analyze the effects of a centralized R&D subsidy policy upon steady state and welfare using an agglomeration and growth model composed of two asymmetric countries. If the policy leads to a steady state characterized by a higher growth rate and lower inequalities, the welfare analysis provides a more contrasted vision on the effects of the policy. Indeed, even though such a policy can eliminate some distortions and improve global welfare, it implies a zero-sum game at national level (the policy increases the welfare in the periphery country and decreases the welfare in the core country) when knowledge spillovers are sufficiently localized. Consequently, a centralized R&D subsidy policy conducted in an economy composed of two asymmetric countries would be a positive-sum game only if international knowledge spillovers are sufficiently large. JEL Classification: F43, H50, R12.

Keywords: NEGG model; R&D subsidy policy; welfare criteria (search for similar items in EconPapers)
JEL-codes: F43 H50 R12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Centralized R&D Subsidy Policy in an NEGG Model: A Welfare Analysis (2013)
Working Paper: Centralized R&D Subsidy Policy in an NEGG Model: A Welfare Analysis (2013)
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