Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099790 | Journal of Economic Dynamics and Control | 2008 | 22 Pages |
Abstract
This paper constructs a scale-free endogenous growth model and studies the determinants of optimal R&D policy. The model combines two of the main approaches to removal of scale effects: the rent protection approach and the diminishing technological opportunities approach. The steady-state rate of innovation is a function of all of the model's parameters including the R&D subsidy/tax rate. Thus, growth is fully endogenous. Numerical simulations imply that it is optimal to tax R&D when innovations are of very small and very large magnitudes, and to subsidize R&D when innovations are of medium size. Under a wide range of empirically relevant calibrations, the subsidy rate turns out to be positive and fluctuates between 5% and 25%.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Fuat Åener,