Knowledge spillovers and the timing of R&D policy
Abstract
We analyze how knowledge spillovers influence the optimal timing of R&D policy. Using numerical simulations we find that optimal subsidies to R&D may be rising over time even when the returns to knowledge is decreasing. The optimal time profile of the subsidies is determined by the elasticity of scale in the R&D production function, which again depends on both the returns to knowledge and the returns to labor.
Description
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