Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 467: High-Technology Subsidies in General Equilibrium: A Sector-Specific Approach

Karolina Ekholm and Johan Torstensson
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Karolina Ekholm: Research Institute of Industrial Economics (IFN)
Johan Torstensson: Lund University

Abstract: We use a specific-factor model to examine the conditions under which policy-makers are able to increase aggregate production of high-tech goods by production or R&D-subsidies in the short and long run. The difficulties for the policy-makers in designing a subsidy scheme that succeeds in expanding aggregate high-tech production involve taking into account the trade-off between resources used in R&D and production of high-tech goods, the relative impact of different R&D activities on productivity, and the ease with which resources may be attracted from the non-high-tech sector of the economy to the various high-tech industries.

Keywords: PRODUCTION; RESEARCH AND DEVELOPMENT; PRODUCTIVITY

JEL-codes: F11; F12

27 pages, September 1996

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