Cost-Reducing R&D with Spillovers and Trade

Journal of Institutional and Theoretical Economics (JITE), vol. 167, no. 2, pp.314-326, 2011

Posted: 22 Mar 2016 Last revised: 19 Apr 2016

See all articles by Rajeev K. Goel

Rajeev K. Goel

Illinois State University - Department of Economics

Shoji Haruna

Okayama University

Date Written: 2011

Abstract

This article incorporates research spillovers and examines behavior of firms in a two-stage, international trade game with process innovation. Governments choose optimal research subsidies in stage 1, and firms take account of the subsidies in choosing research and production in stage 2. Results show that optimal research subsidies differ under spillovers and no spillovers. Strategic responses to foreign research subsidies uniquely occur in cases with spillovers. At certain spillover levels, the optimal R&D policy is a negative subsidy (tax). Findings regarding the effects of trade liberalization support earlier results with perfect appropriability, although the responses to trade liberalization are different with spillovers.

Suggested Citation

Goel, Rajeev K. and Haruna, Shoji, Cost-Reducing R&D with Spillovers and Trade (2011). Journal of Institutional and Theoretical Economics (JITE), vol. 167, no. 2, pp.314-326, 2011 . Available at SSRN: https://ssrn.com/abstract=2752640

Rajeev K. Goel (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

Shoji Haruna

Okayama University ( email )

1-1-1 Tsushimanaka, Kita Ward
Okayama, 700-0082
Japan

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