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Dynamically Optimal R&D Subsidization

Author

Listed:
  • Volker Grossmann
  • Thomas Steger
  • Timo Trimborn

Abstract

Previous research on optimal R&D subsidies has focussed on the long run. This paper characterizes the optimal time path of R&D subsidization in a semi-endogenous growth model, by exploiting a recently developed numerical method. Starting from the steady state under current R&D subsidization in the US, the R&D subsidy should significantly jump upwards and then slightly decrease over time. There is a negligible loss in welfare, however, from immediately setting the R&D subsidy to its optimal long run level, compared to the case where the dynamically optimal policy is implemented.

Suggested Citation

  • Volker Grossmann & Thomas Steger & Timo Trimborn, 2010. "Dynamically Optimal R&D Subsidization," CESifo Working Paper Series 3153, CESifo.
    • Handle: RePEc:ces:ceswps:_3153
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    More about this item

    Keywords

    R&D subsidy; transitional dynamics; semi-endogenous growth; welfare;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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