R&D Subsidies, Multinational Firm Ownership, and Exporting: Rule of Thumb Subsidy Rate

This paper extends Gretz, Highfill, and Scott, "R&D Subsidies and Multinational Firm Ownership," Global Economy Journal (2007) to include the case of exporting to one or two markets. The primary results are that exporting is welfare enhancing for the home country (whether or not the firm is subsidized) when the maximum value of consumers in the foreign country is high, the market size of the foreign country is large, the initial expected number of returns is low, and the fraction of home ownership is high. The paper further constructs and tests a rule of thumb for the optimal subsidy rate.This paper was presented at the 17th International Conference of the International Trade and Finance Association, Miami, in May 2007.