Intel Economics

Paul Segerstrom

No 524, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper presents a model to explain why both industry leaders and follower firms often invest in R&D and explores the welfare implications of these R&D investment choices. Regardless of initial conditions, the equilibrium path in this model involves gradually convergence to a balanced growth path and R&D subsidies have no effect on the balanced growth rate. Nevertheless, it is always optimal for the government to intervene by subsidizing the R&D expenditures of industry leaders and taxing the R&D expenditures of follower firms. Without government intervention, market forces generate too much creative destruction.

Keywords: Economic growth; R&D (search for similar items in EconPapers)
JEL-codes: O32 O41 (search for similar items in EconPapers)
Pages: 38 pages
Date: 1999-12-12
New Economics Papers: this item is included in nep-dev, nep-ind, nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in International Economic Review, 2007, pages 247-280.

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Journal Article: INTEL ECONOMICS (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0524

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