Centralized Innovation Policy in an agglomeration and growth model: A welfare analysis

Innovation policies are strategic tools for reinforcing long-term economic growth. If the literature highlights the need for coordination among national R&D policies, the need for transnational policies appears to be less clear. Using a model à la Martin and Ottaviano (1999), we conduct a welfare analysis in order to judge the effect of a centralized R&D subsidy policy. If theoretical results suggest that this policy can improve efficiency and equity, our welfare analysis shows that when there are few knowledge spillovers between countries, then the policy leads to a conflict of interest. In the case of strong international knowledge spillovers however, the conflict of interest disappears suggesting that innovation policies should first focus on the development of knowledge flows between countries.agglomeration and growth models; innovation policy; welfare criteria

Subsidy Policy for Innovation: A way to reach objectives of both higher growth and equity?

Since the Lisbon Agenda (2000), the European Union policies are in- creasingly oriented towards innovation as attested to by the deep change of the new Regional Policy. This paper proposes an analysis of an innovation subsidy policy in an agglomeration and growth model à la Martin and Ottaviano (1999). In this two-regions model, we assume that the policy is implemented by a central authority that taxes the profit of industrial firms to subsidy employment in innovative activities. We show that the positive effects on growth and equity of such a policy, as highlighted by Martin (1999), hold in the case where the policy is not geographically differentiated. In the case where the government however grants larger subsidies to the poorer region in order to reduce the concentration of the innovative sector, we show that the policy can be inefficient if it is not of sufficient magnitude.economic geography; endogenous growth; public policy; subsidies; Regional Policy

Subsidy Policy for Innovation: A way to reach objectives of both higher growth and equity?

Working paper GATE 2010-31Since the Lisbon Agenda (2000), the European Union policies are in- creasingly oriented towards innovation as attested to by the deep change of the new Regional Policy. This paper proposes an analysis of an innovation subsidy policy in an agglomeration and growth model à la Martin and Ottaviano (1999). In this two-regions model, we assume that the policy is implemented by a central authority that taxes the profit of industrial firms to subsidy employment in innovative activities. We show that the positive effects on growth and equity of such a policy, as highlighted by Martin (1999), hold in the case where the policy is not geographically differentiated. In the case where the government however grants larger subsidies to the poorer region in order to reduce the concentration of the innovative sector, we show that the policy can be inefficient if it is not of sufficient magnitude

Centralized Innovation Policy in an agglomeration and growth model: A welfare analysis

Working paper GATE 2011-01Innovation policies are strategic tools for reinforcing long-term economic growth. If the literature highlights the need for coordination among national R&D policies, the need for transnational policies appears to be less clear. Using a model à la Martin and Ottaviano (1999), we conduct a welfare analysis in order to judge the effect of a centralized R&D subsidy policy. If theoretical results suggest that this policy can improve efficiency and equity, our welfare analysis shows that when there are few knowledge spillovers between countries, then the policy leads to a conflict of interest. In the case of strong international knowledge spillovers however, the conflict of interest disappears suggesting that innovation policies should first focus on the development of knowledge flows between countries

Is financial support for private R&D always justified ? A discussion based on literature on growth

Many economists have long held that market failures create a gap between social and private returns to Research and Development (R&D), thereby limiting private incentives to invest in R&D. However, this common belief that firms significantly underinvest in R&D is increasingly being challenged, leading the rationale behind public support for private R&D to be questioned. In this paper, we attempt to clarify the perspectives of two sources : the theoretical literature on endogenous growth, and its recent developments in integrating a geographical dimension, and the empirical literature that measures the social returns to R&D in relation to the private returns. Ultimately, we are able to clearly distinguish among different types of market failures and compare their relative impact on the gap between the private and social returns to R&D. Two main conclusions are reached. First, systematic firm underinvestment in R&D is not demonstrated. Second, even though instances of underinvestment do occur, they are mainly explained by surplus appropriability problems rather than by knowledge externalities. This suggests the need for a new policy mix that employs more demand-oriented instruments and is more concentrated on identifying efficient allocations among activities rather than merely increasing global private R&D investment

Does South Africa need a statutory business judgement rule?

No Abstract availableDissertation (LLM)--University of Pretoria, 2012.Mercantile Lawunrestricte

Regional alignement and productivity growth

We propose the concept of regional alignment to suggest that synergistic relations among the scientific expertise, technological specialization and industry composition of regions affect regional productivity growth. In this paper, we test an extended conditional β-convergence model using data on 94 French departments (NUTS3) for the period 2001-2011. Our results indicate that a conditional β-convergence is associated with a σ-divergence process in the total factor productivity (TFP) growth of French regions. This process is strongly affected by the level of regional alignment. Indeed, we find evidence that regional alignment both directly and indirectly influences regional productivity growth. The indirect effect of regional alignment materializes through its leverage on R&D investment, which is one of the most important drivers of productivity growth. Moreover, using a heterogeneous coefficients model, we show that the positive effect of regional alignment on TFP growth increases with the industrial diversity of regions, which suggests that regional alignment increases the value of Jacobs externalities more than Marshall-ArrowRomer (MAR) externalities. KE

The impact of the French policy mix on business R&D: How geography matters

Based on a spatial extension of an R&D investment model, this paper measures the macroeconomic impact of the French R&D policy mix on business R&D using regional data. Our measure takes into account not only the direct effect of policies but also indirect effects generated by the existence of spatial interaction between regions. Using a unique database containing information on the levels of various R&D policy instruments received by firms in French NUTS3 regions over the period 2001–2011, our estimates of a spatial Durbin model with structural breaks and fixed effects reveal the existence of a negative spatial dependence among R&D investments in regions. In this context, while a-spatial estimates would conclude that all instruments have a crowding-in effect, we show that national subsidies are the only instrument that is able to generate significant crowding-in effects. On the contrary, it seems that the design, size and spatial allocation of funds from the other instruments (tax credits, local subsidies, European subsidies) lead them to act (in the French context) as beggar-thy-neighbor policies