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THE CLEANSING EFFECT OF R&D SUBSIDIES
Author(s) -
Haruyama Tetsugen
Publication year - 2018
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12150
Subject(s) - subsidy , productivity , economics , investment (military) , monetary economics , microeconomics , labour economics , market economy , macroeconomics , politics , political science , law
The paper develops a patent race model with a particular emphasis upon heterogeneity of competing R&D firms. It is demonstrated that R&D subsidies generate the cleansing effect where relatively lower productivity firms drop out of the race and innovation accelerates due to expanded R&D investment by the remaining firms as well as new entrants with higher productivity than exiting firms.