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Dynamically optimal R&D subsidization

Volker Grossmann (), Thomas Steger () and Timo Trimborn ()

No 97, Working Papers from University of Leipzig, Faculty of Economics and Management Science

Abstract: Previous research on optimal R&D subsidies has focussed on the long run. This paper characterizes the optimal time path of R&D subsidization in a semi-endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented.

Keywords: R&D subsidy; transitional dynamics; semi-endogenous growth; welfare (search for similar items in EconPapers)
JEL-codes: H20 O30 O40 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-fdg and nep-ino
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Journal Article: Dynamically optimal R&D subsidization (2013) Downloads
Working Paper: Dynamically Optimal R\& D Subsidization (2010) Downloads
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