Centralized R&D Subsidy Policy in an NEGG Model: A Welfare Analysis

Benjamin Montmartin

No 2013011, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Since the Lisbon Agenda (2000), European policies have been increasingly oriented toward R&D and innovation. In this context, we analyze the effects of a centralized R&D subsidy policy upon a steady state and welfare situation using an agglomeration and growth model composed of two asymmetric countries. Whereas the policy leads to a steady state characterized by a higher growth rate and lower inequalities, the welfare analysis provides a more contrasted vision on the effects of the policy. Even though such a policy can eliminate some distortions and improve global welfare, it implies a zero-sum game at the national level as the policy increases welfare in the periphery country and decreases it in the core country once knowledge spillovers are sufficiently localized. Consequently, a centralized R&D subsidy policy implemented in an economy composed of two asymmetric countries will be a positive-sum game only if international knowledge spillovers are sufficiently large.

Keywords: NEGG model; R&D subsidy policy; Welfare criteria (search for similar items in EconPapers)
JEL-codes: F43 H50 R12 (search for similar items in EconPapers)
Pages: 29
Date: 2013-03-01
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Centralized R&D Subsidy Policy in an NEGG Model: A Welfare Analysis (2013)
Working Paper: Centralized R&D Subsidy Policy in an NEGG Model: A Welfare Analysis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvre:2013011

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