A politico-economic analysis of the European Union's R&D policy

Angus Chu

Journal of Macroeconomics, 2009, vol. 31, issue 4, 582-590

Abstract: This paper develops an open-economy growth model to analyze the growth and welfare effects of the European Union's R&D policy. In the case of independent countries, each national government chooses the level of government-funded research non-cooperatively and fails to internalize the spillover effects across countries. Consequently, government-funded research is underprovided. In an economic union, the central government budget causes the common-pool problem and leads to an overprovision of government-funded research. Within this framework, we find that although an economic union dominates independent countries in economic growth, the welfare domination is ambiguous. In particular, there is a critical degree of cross-country spillover above (below) which an economic union dominates (is dominated by) independent countries in social welfare.

Keywords: Economic; growth; Government-funded; research; Policy; coordination (search for similar items in EconPapers)
Date: 2009
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Working Paper: A Politico-Economic Analysis of the European Union’s R&D Policy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:31:y:2009:i:4:p:582-590

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