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Incremental R&D Subsidies.
- Source :
- Journal of Regulatory Economics; Mar1995, Vol. 7 Issue 2, p161-175, 15p
- Publication Year :
- 1995
-
Abstract
- An Incremental Incentive Scheme (IIS) encourages some activity by rewarding an agent for overachieving a base level determined by past performance but not penalizing underachievement. We examine an IIS R&D subsidy in a dynamic model due to Grossman and Shapiro (1986). We show that the firm's optimal R&D path either cycles around the no-subsidy path or follows a ‘ratchet’ pattern of small increases in R&D relative to the no-subsidy path. A simple condition determines which type of behavior occurs. Furthermore, we show that an IIS may be an inefficient method of encouraging R&D compared to a flat-rate subsidy. [ABSTRACT FROM AUTHOR]
- Subjects :
- LABOR incentives
AWARDS
PERFORMANCE
RESEARCH & development
SUBSIDIES
Subjects
Details
- Language :
- English
- ISSN :
- 0922680X
- Volume :
- 7
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Journal of Regulatory Economics
- Publication Type :
- Academic Journal
- Accession number :
- 16582870
- Full Text :
- https://doi.org/10.1007/BF01062689