State aid to investment and R&D

Collie, David Robert ORCID: https://orcid.org/0000-0002-3132-648X 2005. State aid to investment and R&D. Economic Papers, vol. 231. European Commission. Available at: http://ec.europa.eu/economy_finance/publications/p...

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Abstract

The prohibition of state aid to Investment and R&D in an integrated market such as the European Community is analysed in a Cournot oligopoly model where firms undertake investment or R&D to reduce their costs. Both strategic and non-strategic investment and R&D are considered. Governments in the member states give subsidies for investment and R&D, which are financed by distortionary taxation so the opportunity cost of government revenue exceeds unity. Prohibiting state aid to investment will always increase aggregate welfare. Prohibiting state aid to R&D will always increase aggregate welfare if spillovers from R&D are small. If spillovers from R&D are moderate then there exists a range of values for opportunity cost where governments give state aid and where the prohibition of state aid will increase aggregate welfare. Prohibiting state aid to R&D will reduce aggregate welfare if spillovers from R&D are large.

Item Type:	Monograph (Other)
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	J Political Science > JA Political science (General) J Political Science > JF Political institutions (General)
Publisher:	European Commission
Last Modified:	24 Oct 2022 11:53
URI:	https://orca.cardiff.ac.uk/id/eprint/49660

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