International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis

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Show simple item record IMPULLITI, Giammario 2008-05-07T08:50:33Z 2008-05-07T08:50:33Z 2008
dc.identifier.issn 1830-7728
dc.description.abstract The geographical distribution of R&D investment changes dramatically in the 1970s and 1980s. In the early 1970s U.S. firms are the uncontested world leaders in R&D investment in most manufacturing sectors. Later, led by Japan and Europe, foreign firms start challenging American R&D leadership in many sectors of the economy. In this period of increasing competition we also observe a substantial increase in the U.S. R&D subsidy. In a version of the multi-country quality ladder growth model I study the effects of foreign R&D competition on domestic welfare and on the optimal R&D subsidy. I build a new empirical index of international R&D rivalry that can be used to perform quantitative analysis in this type of frameworks. In a calibrated version of the model I focus on the period 1979-1991 and perform the following quantitative exercises: first, I evaluate the quantitative effects of the observed increase in foreign R&D competition on U.S. welfare. I find that the positive growth effect and the negative business-stealing effect of foreign competition on U.S. welfare substantially balance each other, and the overall welfare effect of competition is negligible - less then 1 percent of per-capita consumption. Moreover, using estimates of the effective U.S. R&D subsidy rate, I compute the distance from optimality of the observed subsidy at each level of competition. I find that international competition increases the optimal subsidy and that, surprisingly, the U.S. subsidy observed in the data is fairly close to the optimal subsidy. en
dc.language.iso en en
dc.publisher European University Institute
dc.relation.ispartofseries EUI MWP en
dc.relation.ispartofseries 2008/14 en
dc.subject international competition en
dc.subject R&D-driven growth theory en
dc.subject strategic R&D policy en
dc.subject international trade and growth en
dc.subject F12 en
dc.subject F13 en
dc.subject 038 en
dc.subject O41 en
dc.title International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis en
dc.type Working Paper en
dc.neeo.contributor IMPULLITI|Giammario|aut|
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