Dynamically optimal R&D subsidization

Volker Grossmann, Thomas Steger and Timo Trimborn

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 3, 516-534

Abstract: This paper characterizes the optimal time path of R&D and capital subsidization. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a small loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to a time-varying R&D subsidy. The results do not depend on the financing scheme, namely lump sum taxation or factor income taxation. The optimal capital subsidy is time-varying under factor income taxation, but time-invariant when subsidies are financed by lump sum taxes.

Keywords: R&D subsidy; Transitional dynamics; Semi-endogenous growth; Welfare (search for similar items in EconPapers)
JEL-codes: H20 O30 O40 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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Related works:
Working Paper: Dynamically optimal R&D subsidization (2011)
Working Paper: Dynamically Optimal R&D Subsidization (2010)
Working Paper: Dynamically Optimal R\& D Subsidization (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:3:p:516-534

DOI: 10.1016/j.jedc.2012.10.007

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