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Faculty of Economics

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Impullitti, G.

International competition and U.S. R&D subsidies: A quantitative welfare analysis

International Economic Review

Vol. 51(FAVOURITE) no. 4 pp. 1127-1158 (2010)

Abstract: In the early 1970s U.S. firms were the uncontested world leaders in R&D investment in most manufacturing sectors. Later, led by Japan and Europe, foreign firms began to challenge American R&D leadership in many sectors of the economy. This period of increasing technological competition is contemporaneous with a substantial increase in U.S. R&D subsidies. What is the effect of the observed increase in international competition on U.S. welfare? How does foreign competition affect the optimal R&D subsidy in the United States, and, consequently, how far is this from the subsidy observed in the data? This article addresses these questions in a two-country quality ladder growth model.

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