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- Title
ASPECTS OF R&D SUBSIDIZATION.
- Authors
Romano, Richard E.
- Abstract
This paper explores the use of subsidization as a supplemental policy to improve the market's allocation of research and development efforts for a given patent life. Explicit consideration is given to excess social costs concomitant to government subsidization of research and developments and to the nature of competition in research. The most surprising result is that it is always optimal to offer a monopolistic researcher a subsidy, no matter how high is any finite excess burden associated with subsidization. In contrast, it may or may not be optimal to subsidize competitive researchers, depending on the magnitude of that excess burden and on how the market-produced volume of research and development differs from the socially optimal amount. Subsidization is a more useful policy instrument under research monopoly in the sense that the resulting increase in social welfare exceeds the same under competitive research conditions. However, a competitive research market may still be socially preferable to a monopolized one, depending on parameter values.
- Subjects
RESEARCH &; development; PATENTS; RESEARCH grants; SUBSIDIES; PUBLIC spending
- Publication
Quarterly Journal of Economics, 1989, Vol 104, Issue 4, p863
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/2937871