 Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D SubsidiesSlim Ben Youssef and Georges Zaccour Strategic Behavior and the Environment, 2014, vol. 4, issue 1, 41-58 Abstract: In this paper, we consider a duopoly competing on quantity, where firms can invest in R&D to control their emissions. We distinguish between efforts carried out to acquire first-hand knowledge (inventive R&D) and efforts made to develop an absorptive capacity to be able to capture part of the knowledge developed by the rival. There are also free R&D spillovers between firms. To reach the first best outcome, the regulator uses three instruments, namely, a per-unit emissions tax, a per-unit inventive-research subsidy, and a per-unit absorptive-research subsidy. The socially optimal investment cost in inventive R&D is always higher than that in absorptive R&D. Interestingly, when the free spillover is high enough, the regulator gives a greater per-unit subsidy for inventive research, and when it is low enough and the marginal damage cost of pollution is sufficiently high, the regulator supports absorptive research to strengthen R&D spillovers. Moreover, inventive research is actually taxed when the free spillover is low and the marginal damage cost of pollution is high. Keywords: Pollution control; inventive R&D; absorptive capacity; taxes and subsidies; first best (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000043 Access Statistics for this article More articles in Strategic Behavior and the Environment from now publishers |
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