R&D Spillovers and the Case for Industrial Policy in an Open Economy

Dermot Leahy and J. Peter Neary

No 1671, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper we consider the case for subsidies towards firms which generate R&D spillovers in open economies. We show that in the presence of strategic behaviour by firms many expected results are overturned. Local R&D spillovers to other domestic firms may justify an R&D tax rather than a subsidy; R&D cooperation by local firms over-internalizes the externality and also justifies an R&D tax; and international spillovers which benefit foreign firms may justify a subsidy, even though the government cares only about the profits of home firms.

Keywords: Industrial Policy; R&D Spillovers; StrategicTrade Policy (search for similar items in EconPapers)
JEL-codes: F12 L13 (search for similar items in EconPapers)
Date: 1997-07
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: R&D Spillovers and the Case for Industrial Policy in an Open Economy (1999)
Working Paper: R&D Spillovers and the Case for Industrial Policy in an Open Economy (1997)
Working Paper: R&D spillovers and the case for industrial policy in an open economy (1997)
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