Optimal R&D Competition and Economic Growth

Gwanghoon Lee
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Gwanghoon Lee: Chung-Ang University

Korean Economic Review, 2006, vol. 22, 267-297

Abstract: The optimality of R&D competition and its implications on growth and welfare are analyzed in a dynamic general equilibrium model. By explicitly incorporating pre-emptive R&D competition, the relationship between the intensity of competition and the growth rate can be investigated. This paper shows that in the competitive growth path, the number of research firms is larger and the rate of growth is lower than in the optimal growth path. By reducing entry into R&D competition by imposing an entry fee from which the winner of competition is subsidized, this sub-optimality arising from excessive competition could be overcome.

Keywords: R&D competition; Economic growth; Constrained optimality; Human capital (search for similar items in EconPapers)
JEL-codes: O38 O41 (search for similar items in EconPapers)
Date: 2006
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