Are Public and Private R&D Investments Complements or Substitutes?

Arbeitspapier

We develop a general equilibrium model with heterogeneous firms à la Melitz (2003), where both the government and firms can invest into R&D to improve the country's technological potential. A higher technological potential raises the average productivity of firms, thus implying lower consumer prices, and eventually leads to a welfare gain. The government's public and firms' private investments are modelled in a three-stage game, in which the government in the first stage invests into a basic research level, and then firms conduct private R&D building on this publicly provided 'technology' in the second stage. We find that private R&D investments are hump-shaped with respect to the basic research level. For lower levels public and private investments are complements, while for higher levels they are substitutes.

Object Details

• ISBN: 978-3-86788-551-5
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 485

Classification and Topics

• Classification: Wirtschaft
• Subject: heterogeneous firms ; public and private R&D investments ; basic research ; innovation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bohnstedt, Anna
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2014

Further information

• DOI: doi:10.4419/86788551
• Handle: http://hdl.handle.net/10419/97307
• Last update: 10.03.2025, 11:41 AM CET