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.format.mimetype application/pdf
dc.language.iso en en
dc.publisher European University Institute
dc.relation.ispartofseries EUI MWP en
dc.relation.ispartofseries 2008/14 en
dc.rights info:eu-repo/semantics/openAccess
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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