Welfare-reducing discriminatory output subsidies with mixed ownership and R&D

Jiaqi Chen (), Sang-Ho Lee and Timur Muminov
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Jiaqi Chen: Chonnam National University

Economics Bulletin, 2021, vol. 41, issue 3, 1592-1602

Abstract: This study examines the welfare-reducing effect of time-consistent discriminatory output subsidies under duopolistic R&D competition with a semi-public firm. Contrary to the committed case with mixed ownership, we find that the private firm invests more in R&D than the semi-public firm to induce the government to grant higher subsidy, which results in higher output production than the semi-public firm. We also show that optimal discriminatory subsidy rates are higher (lower) than uniform subsidy rates for a sufficiently high (low) degree of privatization, which could decrease (increase) social welfare.

Keywords: mixed ownership; discriminatory output subsidies; R&D competition (search for similar items in EconPapers)
JEL-codes: H2 L3 (search for similar items in EconPapers)
Date: 2021-09-17
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Mixed ownership and R&D under discriminatory output subsidies (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-21-00061

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