EconPapers    
Economics at your fingertips  
 

R&D Subsidies, Innovation Location, and Productivity Growth

Colin Davis and Ken-ichi Hashimoto

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: This paper studies how national research subsidies affect productivity growth and national welfare through adjustments in the geographic location of research and development (R&D) across countries. Our two-country framework features a tension in the firm-level innovation location decision between accessing technical knowledge and sourcing low-cost high-skilled labor. With trade costs and imperfect international knowledge diffusion, the larger country has a greater share of industry and tends to host a larger share of innovation. In this setting, we find that an R&D subsidy expands the implementing country’s share of innovation and raises the rate of productivity growth. Although the non-implementing country experiences a welfare improvement, the rising cost of the policy generates a concave relationship between the R&D subsidy and the welfare of the implementing country, yielding an optimal R&D subsidy rate.

Date: 2023-12
New Economics Papers: this item is included in nep-cse, nep-eff, nep-geo, nep-gro, nep-ino, nep-knm, nep-sbm, nep-tid and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.iser.osaka-u.ac.jp/library/dp/2023/DP1226.pdf

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: https://EconPapers.repec.org/RePEc:dpr:wpaper:1226

Access Statistics for this paper

More papers in ISER Discussion Paper from Institute of Social and Economic Research, Osaka University Contact information at EDIRC.
Bibliographic data for series maintained by Librarian ().

 
Page updated 2024-07-06
Handle: RePEc:dpr:wpaper:1226