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Research Institute of Industrial Economics (IFN) Working Paper Series

No 524:
Intel Economics

Paul S. Segerstrom ()

Abstract: This paper presents a model to explain why both industry leaders and follower firms often invest in R&D and explores the welfare implications of these R&D investment choices. Regardless of initial conditions, the equilibrium path in this model involves gradually convergence to a balanced growth path and R&D subsidies have no effect on the balanced growth rate. Nevertheless, it is always optimal for the government to intervene by subsidizing the R&D expenditures of industry leaders and taxing the R&D expenditures of follower firms. Without government intervention, market forces generate too much creative destruction.

Keywords: Economic growth; R&D; (follow links to similar papers)

JEL-Codes: O32; O41; (follow links to similar papers)

38 pages, December 12, 1999

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This paper is published as:
Segerstrom, Paul S., (2007), 'Intel Economics', International Economic Review, Vol. 48, No. 1, pages 247-280



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