Government Subsidies of R&D in a Product Cycle Framework: U.S.-Japan Simulations
Year: 1997
Type: preprint
Abstract: We examine the welfare effects of R&D subsidies using a product cycle model of trade between two developed countries. We simulate steady-state welfare in Japan and the U.S. for high- and low-skilled labor over different combinations of subsidy rates. Japanese subsidies to R&D usually benefit Americans due to an increase in product variety. However, because Japanese R&D reduces wages in the U.S. 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.
Source: SSRN Electronic Journal
Authors: Alison Butler, Shannon K. Mitchell
Institutions: Willamette University, Virginia Commonwealth University
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121679194