Proteccionism under R&D Policy: Innovation Rate and Welfare

Felipa De Mello-Sampayo, Sofia de Sousa-Vale, Francisco Camões and Orlando Gomes
Additional contact information
Sofia de Sousa-Vale: ISCTE-IUL - Department of Economics and UNIDE-ERC
Francisco Camões: ISCTE-IUL - Department of Economics and UNIDE-ERC

No ercwp0210, Working Papers Series 1 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: The pressure from national lobbies may lead governments to shift from an optimal into a non-optimal innovation policy. This paper examines the growth and welfare effects of optimal and non-optimal innovation policies. The non-optimal policy corresponds to a subsidy for national innovators that is equivalent to an optimal policy of incentives (tax cuts) to foreign investors. Since we are assessing what can nationals do with the support that could be oriented to foreign firms, we are measuring what the economy loses for not supporting foreign firms. We find welfare loss when supporting national R&D instead of foreign R&D. We conclude that the same support given to innovation can produce strikingly different outcomes depending on who receives the support.

Keywords: Endogenous Growth; Foreign Direct Investment; R&D Policy (search for similar items in EconPapers)
JEL-codes: F21 H21 O40 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2010-02-15
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Protectionism under R&D policy: innovation rate and welfare (2012)
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