Cost-reducing R&D with spillovers and trade

Rajeev K. Goel, Shoji Haruna

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)


This article incorporates research spillovers and examines behavior of firms in a two-stage, international trade game with process innovation. Governments choose optimal research subsidies in stage 1, and firms take account of the subsidies in choosing research and production in stage 2. Results show that optimal research subsidies differ under spillovers and no spillovers. Strategic responses to foreign research subsidies uniquely occur in cases with spillovers. At certain spillover levels, the optimal R&D policy is a negative subsidy (tax). Findings regarding the effects of trade liberalization support earlier results with perfect appropriability, although the responses to trade liberalization are different with spillovers.

Original languageEnglish
Pages (from-to)314-326
Number of pages13
JournalJournal of Institutional and Theoretical Economics
Issue number2
Publication statusPublished - Jun 2011

ASJC Scopus subject areas

  • Economics and Econometrics


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