Paul S. Segerstrom

The Long-Run Growth Effects of R&D Subsidies

This article presents a generalized versionof Howitts (1999) model of R&D-driven growth withoutscale effects and a complete characterization of the long-rungrowth effects of R&D subsidies. R&D subsidiescan either promote or retard long-run economic growth, and surprisingly,the growth-retarding outcome occurs for a wide range of plausibleparameter values. This article also presents a new intuitiveexplanation for why R&D subsidies can have long-rungrowth effects (both positive and negative).

The growth and welfare effects of international mass migration

We analyse the effects of immigration quotas on growth and discounted welfare in a North-South version of the quality ladders growth model. Immigration quotas in the North increase the growth rate of utility for all consumers. However, they lower the static utility level and discounted welfare of Northern workers. Also the discounted welfare of asset owners drops. Hence, unlike in the static migration model where the representative agent in the host country benefits from immigration, in our dynamic migration model, the representative agent loses despite a positive growth effect of immigration. In general, the winners of a liberal immigration policy in the North are the immigrants and the remaining workers in the south.

Trade Liberalization and Productivity Growth

This paper presents a trade model with firm-level productivity differences and R&D-driven growth. Trade liberalization causes the least productive firms to exit but also slows the development of new products. The overall effect on productivity growth depends on the size of intertemporal knowledge spillovers in R&D. When these spillovers are relatively weak, then trade liberalization promotes productivity growth in the short run and makes consumers better off in the long run. However, when these spillovers are relatively strong, then trade liberalization retards productivity growth in the short run and makes consumers worse off in the long run.

The R&D Incentives of Industry Leaders

This paper presents a model to explain why industry leader firms often devote substantial resources to R&D activities and explores the welfare implications of this investment. The key new assumption is that industry leaders can improve their own products more easily than can other firms. When industry leaders have R&D cost advantages, it is optimal for the government to subsidize the R&D expenditures of all firms, subsidize the production expenditures of industry leaders, and tax the profits of new industry leaders. Without government intervention, market forces generate too much creative destruction. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

International Migration and Growth in Developed Countries: A Theoretical Analysis

We use a two-country version of the quality ladders endogenous growth model and show that free international migration raises world growth if it is driven by imbalances in labour supplies. International migration may, however, lower growth if it is induced by policy differences across, countries. Moreover, other things being equal, workers want to migrate to less populated countries, to countries that subsidize R&D less, to countries with lower tariffs, and to countries with wealthier consumers. Neither structural nor public policy differences generate any differences in growth rates across countries when tariffs are set at non-prohibitively high levels. Copyright 2000 by The London School of Economics and Political Science

Demons and repentance

Abstract This paper presents a new explanation for the stability of cartels. For a large class of repeated Cournot duopoly games with discounting, strategies are constructed which have the property that cheating on the cartel is followed by repentance. It is shown than these repentance strategies are subgame perfect equilibrium strategies and that in the presence of demons (infrequently irrational behavior on the part of both players), they lead to Pareto superior expected discounted payoffs in comparison with either Friedmans trigger strategies or Abreus “stick and carrot” strategies.

North–South Trade with Multinational Firms and Increasing Product Variety

We present a model of North-South trade with multinational firms and increasing product variety. Firms engage in innovative R&D to develop new product varieties in the North and foreign a!liates of multinational firms engage in adaptive R&D to learn how to produce product varieties in the South. We find that a shift to stronger protection of intellectual property rights in the South induces foreign a!liates of multinational firms to increase their R&D expenditures, results in a faster rate of technology transfer within multinational firms and increases long-run consumer welfare in both regions.

High-Technology-Industry Trade and Investment: The Role of Factor Endowments

Abstract This paper develops a dynamic general equilibrium model of international research and development (R&D) competition based on the Heckscher-Ohlin structure of production. We analyze the models unique steady-state equilibrium in which both R&D expenditures and the rate at which firms discover new superior products are constant over time. The model generates intraindustry trade, inteerindustry trade, product cycles and multinational corporations even when factor price equalization prevails across countries. These phenomena on the factor endowments. In the absence of r&D incentives the model reduces to the familiar Heckscher–Ohlin model at each point in time.

On the feasibility of maximal collusion

Abstract This note explores when joint profit maximizing behavior between firms can be supported by (arbitrary) subgame perfect equilibrium strategies. We show that, for a large class of games, maximal collusion is feasible if and only if a simple discount parameter condition is satisfied.