Globally Optimal R&amp;D Subsidy Policy: an Economist's View on the WTO Subsidy Agreement

Kang, Moonsung

doi:10.11130/jei.2008.23.2.346

Cited by 2 publications

(2 citation statements)

References 8 publications

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“…country) selling to a third market. See Kujal andRuiz (2009), Liao (2007), and Kang (2006Kang ( , 2008. Otherwise they are quite similar in that R&D costs are quadratic; the three stage game is used, and so forth.…”

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confidence: 97%

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R&D subsidy games: a cost sharing approach vs. reward for performance

2010

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This paper investigates government subsidy games for private sector research and development (R&D) in a two-country two-firm intra-industry trade model. Two funding structures are compared: ''cost sharing'' vs. ''reward for performance.'' Both the theoretical evidence and the results of a Monte Carlo simulation suggest that cost sharing is associated with higher social surplus and quality improvement because it prompts the firm to do more R&D. In a cost sharing program government and firm R&D are always complements. In the reward for performance program government and firm R&D may be complements, but are usually substitutes. In the Monte Carlo results the average firm contribution to R&D expenditure is actually negative with a reward for performance funding structure-raising the question of whether it might be construed as corporate welfare. Finally, the paper characterizes funding priorities for both structures in the case when subsidy dollars are scarce and when they are not.

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confidence: 97%

“…Gretz et al (2009), Liao (2007), and Kujal and Ruiz (2009) consider the cost sharing structure. Kind (2006, 2008), Kang (2006Kang ( , 2008, and DeCourcy (2005) consider the reward for performance structure. As far as we are aware, no one has compared funding structures, or indeed, noticed the fact that the two different structures exist in the literature.…”

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confidence: 99%