Jo, Seung-gyu and den Butter, Frank A. G. (2009): Pros and Cons of Backing Winners in Innovation Policy.
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In the economics profession there is a fierce debate whether industrial and innovation policy should be targeted to specific sectors or firms. This paper discusses the welfare effects of such targeted policies in a third-market international trade model under imperfect competition. A theoretical case for picking winners through a preferential innovation policy is discussed, which is shown to hold without evoking retaliation from foreign competitors. However, in practice information uncertainties remain a concern. The question whether in this case ‘backing winners’ is a wise policy option depends on the characteristics of the information asymmetries and on the extent the government is able to design selection procedures in a way to minimize the transaction costs that may be caused from the market participants’ opportunistic behavior.
|Item Type:||MPRA Paper|
|Original Title:||Pros and Cons of Backing Winners in Innovation Policy|
|Keywords:||Innovation policy; R&D subsidies, strategic trade policy, asymmetric information, spill-over effects|
|Subjects:||O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy; Factor Movement Policy; Foreign Exchange Policy
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
|Depositing User:||Seung-gyu Jo|
|Date Deposited:||05. Oct 2009 10:12|
|Last Modified:||12. Feb 2013 12:19|
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