Industrial Policy and Firm Heterogeneity
Our concern is about a firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D to in two distinct ways. They differ both in...
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| Format: | workingPaper |
| Language: | eng |
| Published: |
2019
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| Online Access: | http://hdl.handle.net/10362/89024 |
| Country: | Portugal |
| Oai: | oai:run.unl.pt:10362/89024 |
| Summary: | Our concern is about a firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D to in two distinct ways. They differ both in the costs of performing R&D activities and in the output obtained from such activities. The introduction of several domestic firms creates a corrective motive for government intervention with the firms' R&D activities in addition to Spencer and Brander's strategic motive. We find that the optimal firm-specific industrial policy. is affected differently by the two sources of firm heterogeneity. Another finding is that a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm. |
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