Economics at your fingertips  

R&D policy and competition in a Schumpeterian growth model with heterogeneous firms

Carmelo Parello ()

Oxford Economic Papers, 2019, vol. 71, issue 1, 187-202

Abstract: This paper presents a second-generation Schumpeterian growth model to investigate the existence of possible links between firms’ size, competition stiffness and the effectiveness of R&D policy. In the model, the step size of innovation is randomly drawn from a Pareto distribution, and firms are heterogeneous in terms of market power. The paper finds that the optimal R&D policy is to subsidize R&D and not to tax it, and that more intense competition enlarges the gap between free-market R&D investment and the optimal outcome. However, the paper also finds that the short-run impact on welfare of R&D policy is always negative, and that the recovery time of the welfare loss as a result of the subsidy is negatively related to firms’ market power.

JEL-codes: E10 L16 O31 O38 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Oxford Economic Papers is currently edited by A. Banerjee and James Forder

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2019-06-19
Handle: RePEc:oup:oxecpp:v:71:y:2019:i:1:p:187-202.