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Jiaqi Chen, Sang-Ho Lee and Timur K. Muminov
''Welfare-reducing discriminatory output subsidies with mixed ownership and R&D''
( 2021, Vol. 41 No.3 )
This study examines the welfare-reducing effect of time-consistent discriminatory output subsidies under duopolistic R&D competition with a semi-public firm. Contrary to the committed case with mixed ownership, we find that the private firm invests more in R&D than the semi-public firm to induce the government to grant higher subsidy, which results in higher output production than the semi-public firm. We also show that optimal discriminatory subsidy rates are higher (lower) than uniform subsidy rates for a sufficiently high (low) degree of privatization, which could decrease (increase) social welfare.
Keywords: mixed ownership; discriminatory output subsidies; R&D competition
JEL: L3 - Nonprofit Organizations and Public Enterprise: General
H2 - Taxation, Subsidies, and Revenue: General
Manuscript Received : Jan 18 2021 Manuscript Accepted : Sep 17 2021

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