The B.E. Journal of Economic Analysis & Policy
Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra
Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine
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Most Downloaded Articles
- The Inheritance of Educational Inequality: International Comparisons and Fifty-Year Trends by Hertz, Tom/ Jayasundera, Tamara/ Piraino, Patrizio/ Selcuk, Sibel/ Smith, Nicole and Verashchagina, Alina
- IQ and Family Background: Are Associations Strong or Weak? by Björklund, Anders/ Hederos Eriksson, Karin and Jäntti, Markus
- Do Rising Top Income Shares Affect the Incomes or Earnings of Low and Middle-Income Families? by Thompson, Jeffrey P. and Leight, Elias
- Therapeutic Equivalence and the Generic Competition Paradox by Nabin, Munirul Haque/ Mohan, Vijay/ Nicholas, Aaron and Sgro, Pasquale M.
- Before and After: Gender Transitions, Human Capital, and Workplace Experiences by Schilt, Kristen and Wiswall, Matthew
Growth and Innovation Policy in a Small, Open Economy: Should You Stimulate Domestic R&D or Exports?
Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 11, Issue 1, ISSN (Online) 1935-1682, DOI: 10.2202/1935-1682.2601, July 2011
- Published Online:
In small and open economies, absorption of foreign knowledge through international trade often plays a more important role for domestic innovation and growth than investment in domestic R&D. This suggests that trade policies can increase knowledge spillovers from abroad. Public support to R&D can be motivated both by positive internal knowledge externalities and by its ability to expand absorptive capacity. This dynamic, empirical, general equilibrium analysis models these interplays between R&D, trade and productivity. It compares public R&D support and export promotion of R&D based products with respect to long term growth and welfare impacts. We find that export promotion is inferior to R&D support in spurring R&D. However, it is not outperformed in terms of welfare generation. The reason is that existing and politically persistent policy interventions create inefficiencies that can be counteracted by R&D-based export promotion as a second-best policy.