Spillovers reconsidered: How optimal R&D subsidies depend on the spillover process
Georg von Graevenitz, University College London, United Kingdom
This paper provides an analysis of optimal R&D subsidies under varying assumptions on the spillover process. We allow for processes under which spillovers give rise to both negative and positive externalities. It is shown that the rationale for public policy intervention is maintained and may be strengthened where spillovers are positive. We show that this conclusion rests on the supermodularity of the spillover process. By isolating this property we are able to characterise a large class of spillover processes with similar implications for public policy.
Date: 08 April-00 0000