Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94684
Authors: 
Segerstrom, Paul S.
Year of Publication: 
1999
Series/Report no.: 
IUI Working Paper 524
Abstract: 
This paper presents a model to explain why both industry leaders and follower firms often invest in R&D and explores the welfare implications of these R&D investment choices. Regardless of initial conditions, the equilibrium path in this model involves gradually convergence to a balanced growth path and R&D subsidies have no effect on the balanced growth rate. Nevertheless, it is always optimal for the government to intervene by subsidizing the R&D expenditures of industry leaders and taxing the R&D expenditures of follower firms. Without government intervention, market forces generate too much creative destruction.
Subjects: 
Economic growth
R&D
JEL: 
O32
O41
Document Type: 
Working Paper

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