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R&D Subsidies, Spillovers, and Privatization in Mixed Markets

Maria José Gil-Moltó (), Joanna Poyago-Theotoky and Vasileios Zikos ()
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Maria José Gil-Moltó: Department of Economics, University of Leicester, Leicester LE1 7RH, England, UK

Authors registered in the RePEc Author Service: Maria Jose Gil Molto ()

Southern Economic Journal, 2011, vol. 78, issue 1, 233-255

Abstract: We examine the use of subsidies to research and development (R&D) in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers, but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production; however, it does not lead to the equalization of per firm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided.

JEL-codes: L31 L32 O38 L13 L50 (search for similar items in EconPapers)
Date: 2011
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