Government policy failure in public support for research and development

peer-reviewedPromoting Research and Development (R&D) and innovative activity is a key element of the EU Lisbon Agenda and is seen as playing a central part in stimulating economic development. In this paper we argue that, even allowing for benevolent policy-makers, informational asymmetries can lead to a misallocation of public support for R&D, hence government policy failure, with the potential to exacerbate preexisting market failures. Initially, we explore alternative allocation mechanisms for public support, which can help to minimize the scale of these government policy failures. Of these mechanisms (grants, tax credits, or allocation rules based on past performance), our results suggest that none is universally most efficient. Rather, the effectiveness of each allocation rule depends on the severity of financial constraints and on the level of innovative capabilities of the firms themselves.ACCEPTEDpeer-reviewe

Can Trade with the People’s Republic of China be an Engine of Growth for Developing Asia?

The recession in the United States in the wake of the global financial crisis has had a pronounced negative impact on developing Asia's exports and growth. As a result, developing Asian countries are increasingly looking to the People's Republic of China (PRC) as a new source of demand and growth. The central objective of this paper is to empirically assess whether trade with the PRC can become an engine of growth for developing Asia. To do so, we examine the structure of PRC's trade with developing Asia, in particular the relative shares of parts and components versus final goods in its imports from the region. Our most significant result is that the share of final goods in the PRC's imports from East and Southeast Asia has been rising while the share of parts and components has been falling, suggesting that the PRC is becoming more of a consumer and less of an assembler. This provides ground for optimism about the prospects of trade with the PRC as a source of resilience against extra-regional demand shocks in the short run and an additional source of growth in the long run

Diffusing the Cloud: Cloud Computing and Implications for Public Policy

cloud computing, IT services, information technology, political economy, L63, L86, L96,

The development of the service industry in the modern economy: mechanisms and implications for China

The present paper attempts to examine three types of mechanisms, including specialized division of labor, innovation, and demand-induced mechanisms that are crucial in the development of the service industry in the modern economy. The underdevelopment of transacted-through-market services in China is mainly caused by problems with these three mechanisms and especially by a lower level of specialized division of labor in the market rather than the fact that China is still at an earlier economic development stage than many of the economies used as comparisons. Government strategy should be prioritized to reduce obstacles and transaction costs that are inhibiting the evolution of specialization and the division of labor required for the development of a diverse and dynamic service sector that will help China optimize its economic structure