Industrial Policy and Firm Heterogeneity |
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Authors: | Pedro P Barros & Tore Nilssen |
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Institution: | Universidade Nova de Lisboa, Lisbon, Portugal,;University of Oslo, Norway |
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Abstract: | Our concern in this paper is with firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises as to which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D technologies in two distinct ways: in the costs of performing R&D activities and in the output obtained from such activities. We find that the optimal firm-specific industrial policy is affected differently by the two sources of firm heterogeneity. Furthermore, a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm. JEL classification: O 31; L 52; F 13 |
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Keywords: | firm heterogeneity industrial policy R&D |
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