Demand Shift Effect of R&;D and the R&;D Organization

We assume that R&D investment by a firm improves the quality of the product. This is reflected in an upward shift of the demand function. Firms can do R&D either independently or cooperatively. We show that cooperative research strictly dominates non-cooperative research, both in terms of profitability and welfare. Also, R&D investment by each firm under cooperative research is larger for a relatively high R&D output elasticity. The higher the degree of product differentiation and/or larger the R&D output elasticity is, the larger the increase in quality level under cooperative research, compared to non-cooperative research, will be.     

Subsidizing Technological Innovations in the Presence of R&D Spillovers

Abstract. We analyze a situation where a principal wants to induce two firms to produce an output, for example electricity from renewable energy sources. Firms can undertake non-contractible investments to reduce production cost of the output. Part of these investments spills over and also reduces production cost of the other firm. Comparing a general price subsidy and an innovation tournament, we find that the principal's expected cost of implementing a given expected output is always higher under the tournament, even though this scheme may lead to more innovation.     

Private value of European patents

I examine the joint patent designation-renewal behavior of the European Patent Office (EPO) patent applicants during 1978-1996, using both nonparametric techniques and a parametric model. The European patents granted through the EPO are substantially more valuable than those through the national route. Value distribution of patents is highly skewed, and even more so for the EPO patent families. The value of patent rights increases with the economic size of the country and exhibits modestly increasing returns to scale. Model estimation also reveals significant institutional differences across EPO member countries in patent protection.     

The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions

In this paper we investigate the macroeconomic impact of natural disasters in developing countries by examining hurricane strikes in the Central American and Caribbean regions. Our innovation in this regard is to employ a wind field model on hurricane track data to arrive at a more scientifically based index of potential local destruction. This index allows us to identify damages at a detailed geographical level, compare hurricanes' destructiveness, as well as identify the countries that are most affected, without having to rely on potentially questionable monetary loss estimates. Combining our destruction index with macroeconomic data we show that the average hurricane strike caused output to fall by at least 0.83 percentage points in the region, although this depends on controlling for local economic characteristics of the country affected and what time of the year the storm strikes.     

Characterizing the sustainability problem in an exhaustible resource model

We provide a general condition under which consumption can be sustained indefinitely bounded away from zero in the continuous time Dasgupta–Heal–Solow–Stiglitz model, by letting augmentable capital substitute for a non-renewable resource. The assumptions made on the production function are mild, thus generalizing previous work. By showing that Hartwick?s rule minimizes the required resource input per unit of capital accumulation, and integrating the required resource input with respect to capital, we obtain a complete technological characterization without reference to the time path. We also use the characterization result to establish general existence of a maximin path.     

Issues in environmental justice within the European Union

This paper surveys pressing issues facing current and future social policies in the European Union (EU) at the juncture of social justice demands and environmental concerns. European policy-makers have in fact only recently acknowledged the notions of environmental justice and environmental inequalities, which have been part of the US policy arsenal for almost two decades. Yet, challenges to equality and fairness in the environmental domain are many and growing within the European Union. After having defined environmental justice and environmental inequalities in the European context, the paper addresses two contemporary dimensions of those challenges for EU social policies: vulnerability and exposure to environmental disaster and risk; and fairness in environmental taxation and the related issue of fuel poverty.     

Unsuccessful patent application and cooperative R&;D

We show that uncertainty in patent approvals may induce the firms to do cooperative R&D. With an exogenous probability of success in patent application, we show that, if all firms apply for patents under non-cooperative R&D, the firms prefer cooperative R&D than non-cooperative R&D for moderate (high) probabilities of success in patent applications, if the cost of patenting is small (large). We also show the implications of entry of non-innovating firms and endogenous probability of success in patent applications.      

Agriculture production versus biodiversity protection: The impact of North-South unconditional transfers

The purpose of this paper is to explore whether international income transfers can improve or worsen the global level of biodiversity and global social welfare by changing the relative contributions to biodiversity protection and to agricultural production. Because of the public good nature of biodiversity, Warr's neutrality theorem suggests that such transfers may have no effects at all (Warr, 1983). A model is developed, based on the simplifying assumption that northern countries have little biodiversity whereas southern countries are endowed with natural capital in the form of (generally unspoilt) biodiversity-rich land. Southern countries allocate optimally land and capital to two competing productive activities, agriculture and eco-tourism. When transfers are organized from the North to the South, we show that Warr's neutrality theorem collapses. Transfers can either reduce or increase the natural capital in the South, depending on some empirically verifiable hypotheses concerning the characteristics of the eco-tourism and agricultural production functions. In addition, we demonstrate that welfare improvements can be obtained even with reductions in the level of biodiversity.     

International asymmetric R&;D rivalry and industrial strategy

Profit-sharing licensing is quite a common business practice. In a Cournot duopoly model, we showed that if not subject to any restrictions this kind of technology for equity deal would lead to a decline in industry output and hurt consumers. To avoid the industry output contraction and protect the interests of consumers, the government can intervene in licensing by requiring that the profit-sharing rate specified by a licensing contract should not exceed the percentage difference of involved firms’ equilibrium outputs before licensing.     

Carbon dioxide emission and income: A temporal analysis of cross-country distributional patterns

This paper explores the relationship between the inter-country income inequality and CO₂ emission and temporal shifts in such a relationship. It also examines how the mean per capita CO₂ emission and its distributional inequality are related to the corresponding mean and the distributional inequality of income. The analysis is based on a cross-country panel data set at the level of country-group. Here environmental damage is treated as a private good and the technique of Lorenz and specific concentration curve analysis have been used as the basic analytical framework to argue that distributional inequality of income should be an explanatory variable in the Environmental Kuznets Curve relationship, along with the mean income level. In the empirical exercise, Johansen's cointegration analysis technique is used to explore existence of statistically significant cointegrating vector(s) relating mean emission and Specific Concentration Ratio of emission to mean income level and Lorenz Ratio of income, using a set of country-group specific time series data set which covers four country-groups (viz., Africa, America, Asia and Europe) and the World as a whole. The empirical results confirm that the inter-country income inequality has significant effect on the mean emission level and inter-country inequality of emission level for most of the country-groups considered.     

Climate policy and the optimal extraction of high‐ and low‐carbon fossil fuels

Abstract. We study how restricting CO₂ emissions affects resource prices and depletion over time. We use a Hotelling‐style model with two non‐renewable fossil fuels that differ in their carbon content (e.g., coal and natural gas) and in addition are imperfect substitutes in final good production. We show that an economy facing a CO₂ flow‐constraint may substitute towards the relatively dirty input. As the economy tries to maximize output per unit of emissions it is not only carbon content that matters: productivity matters as well. With an announced constraint the economy first substitutes towards the less productive input such that more of the productive input is available when constrained. Preliminary empirical results suggest that it is cost‐effective to substitute away from dirty coal to cleaner oil or gas, but to substitute from natural gas towards the dirtier input oil.     

Trade-related R&D Spillovers in Vietnamese Manufacturing

ABSTRACT

This study aims to examine how Vietnamese manufacturing could benefit from R&D investment locally and from OECD countries through trade during a period marked with major trade liberalisations. Using the industry-level data during 2000–2009, it finds that the foreign R&D has accounted for the most part of the R&D spillovers in the sector, with a larger proportion earning from the other foreign industries’ R&D. The domestic industries’ own R&D has improved the sector’s total factor productivity, but in a relatively smaller magnitude compared to the foreign sources. In examining the localised effects of R&D spillovers in Vietnamese manufacturing, the results reiterate the important roles of trade-embedded foreign R&D spillovers from Japan, the US, South Korea, and Germany in the sector’s total factor productivity growth. These findings altogether give support to foreign technology diffusion as a major conduit for growth prospects in Vietnamese manufactures.     

GROWTH, R&D AND WELFARE: THE ROLE OF PUBLIC POLICY

This paper analyzes the normative side of an R&D growth model in which market structure and growth are jointly determined in the equilibrium of a one‐sector economy under monopolistic competition. We find that a distortion in the allocation of R&D, namely the presence of technological spillovers between firms, generates two market failures: insufficient growth and excessive entry of firms. We show that this result is driven by the interplay between market structure and growth. A simple tax/subsidy scheme to support the efficient solution is proposed.     

Effects of coordinated strategies on product and process R&;D

Using a game theoretical model on firms’ simultaneous investments in product and process R&D, we advance and empirically test hypotheses on the role of externalities on the optimal R&D portfolio of cooperating firms and independently competing firms. We use Community Innovation Survey data on 3,696 Italian manufacturing firms. In line with our model we find that members of a group of firms invest significantly more into product, process, and aggregate R&D than independent firms. Further, their R&D portfolios tend to show a higher product versus process ratio. However, with regard to R&D performance and efficiency we find that independent firms are superior.      

R&;D: A Small Contribution to Productivity Growth

In this article I evaluate the contribution of R&D investments to productivity growth. The basis for the analysis are the free entry condition and the fact that most R&D innovations are embodied. Free entry yields a relationship between the resources devoted to R&D and the growth rate of technology. Since innovators are small, this relationship is not directly affected by the size of R&D externalities, or the presence of aggregate diminishing returns in R&D after controlling for the growth rate of output and the interest rate. The embodiment of R&D-driven innovations bounds the size of the production externalities. The resulting contribution of R&D to productivity growth in the US is smaller than 3–5 tenths of 1% point. This constitutes an upper bound for the case where innovators internalize the consequences of their R&D investments on the cost of conducting future innovations. From a normative perspective, this analysis implies that, if the innovation technology takes the form assumed in the literature, the actual US R&D intensity may be the socially optimal.     

Spillovers and the competitive pressure for long-run innovation

This paper discusses the impact of oligopolistic product markets for innovation and growth, highlighting a novel, fundamental role of spillovers. We develop a model of endogenous growth with non-tournament R&D, where spillovers raise the relative R&D efficiency of laggards. A key feature is that the rate of innovation and the market configuration (i.e. the distribution of market shares) are jointly determined. Our results emphasize the role of spillovers in sustaining the competitive pressure that is fundamental for long-run innovation and economic growth.     

R&D Spillovers and Growth: Specialization Matters

We explore the relationship between openness and growth by taking a closer look at trade‐related knowledge spillovers at the industry level. First, we estimate the relation between sectoral R&D expenditures, trade‐related spillovers, and growth. Next, we incorporate these R&D linkages in a computable general‐equilibrium model for the world economy. We simulate trade liberalization in the model with R&D spillovers and compare the effects on GDP in different regions with a non‐R&D‐based model simulation. We find that the GDP effects of trade liberalization are magnified considerably by R&D spillovers for some regions—notably Japan and Southeast Asia. In other regions, such as China, the additional GDP effects are modest. These findings can be traced back to changing specialization and import patterns.     

Entry Solicitation and Deterrence in R&D Competition with Spillovers

The purpose of this note is to examine incumbent behaviour and patterns of entry under R&D competition with spillovers. We find that, in addition to blockading, deterring and accommodating entry, the incumbent may also solicit entry. Entry solicitation occurs when the incumbent strategically alters its R&D commitment in order to take advantage of the spillover generated by the entrant's subsequent R&D investment. Although our results are placed in the context of R&D with spillovers, they are applicable to a wider class of models involving positive externalities, particularly network externalities.
JEL Classification Numbers: L12, O31.     

R&;D and productivity: testing sectoral peculiarities using micro data

The aim of this study is to investigate the relationship between a firm’s R&D activities and its productivity using a unique micro data panel dataset and looking at sectoral peculiarities which may emerge; more specifically, we used an unbalanced longitudinal database consisting of 532 top European R&D investors over the 6-year period 2000–2005. Our main findings can be summarised along the following lines: knowledge stock has a significant positive impact on a firm’s productivity, with an overall elasticity of about 0.104; this general result is largely consistent with previous literature in terms of the sign, the significance and the estimated magnitude of the relevant coefficient. More interestingly, the coefficient increases monotonically when we move from the low-tech to the medium-high and high-tech sectors, ranging from a minimum of 0.03/0.05 to a maximum of 0.14/0.17. This outcome suggests that firms in high-tech sectors are still far ahead in terms of the impact on productivity of their R&D investments, at least as regards top European R&D investors.