Government Subsidies of R&D in a Product Cycle Framework: US-Japan Simulations.
The welfare effects of R&D subsidies are examined using a product cycle model of trade between two developed countries. Simulations are done for steady-state welfare in Japan and the USA for high- and low-skilled labor over different combinations of subsidy rates. Japanese subsidies to R&D usually benefit Americans owing to an increase in product variety. However, because Japanese R&D reduces wages in the US high-tech sector, American high-skilled workers are hurt if Japanese subsidies are too large. Large American subsidies may cause Japanese innovation to cease. However, Japanese steady-state welfare would be maximized in this case. Copyright 1998 by Blackwell Publishing Ltd.
Year of publication: |
1998
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Authors: | Butler, Alison ; Mitchell, Shannon K |
Published in: |
Review of International Economics. - Wiley Blackwell, ISSN 0965-7576. - Vol. 6.1998, 3, p. 386-400
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Publisher: |
Wiley Blackwell |
Saved in:
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