Abstract

http://ssrn.com/abstract=1656247
 
 

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Dynamically Optimal R&D Subsidies


Volker Grossmann


University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Timo Trimborn


University of Hannover

Thomas Michael Steger


University of Leipzig/Institute for Theoretical Economics/Macroeconomics; CESifo (Center for Economic Studies and Ifo Institute)

August 4, 2010


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.

Number of Pages in PDF File: 33

Keywords: R&D subsidy, Transitional dynamics, Semi-endogenous growth, Welfare

JEL Classification: H20, O3, O4

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Date posted: August 11, 2010  

Suggested Citation

Grossmann, Volker and Trimborn, Timo and Steger, Thomas Michael, Dynamically Optimal R&D Subsidies (August 4, 2010). Available at SSRN: http://ssrn.com/abstract=1656247 or http://dx.doi.org/10.2139/ssrn.1656247

Contact Information

Volker Grossmann (Contact Author)
University of Fribourg (Switzerland) - Faculty of Economics and Social Science ( email )
Fribourg, CH 1700
Switzerland
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Timo Trimborn
University of Hannover ( email )
Welfengarten 1
D-30167 Hannover
Germany
Thomas Michael Steger
University of Leipzig/Institute for Theoretical Economics/Macroeconomics ( email )
Grimmaische Str. 12
D-04109 Leipzig
Germany
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany
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