Technological Rivalry and Optimal Dynamic Policy in an Open Economy / Yan Bai, Keyu Jin, Dan Lu.

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Bai, Yan

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31703.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: What are a country's policy options in the face of emerging technologies development in a global economy? To answer this question, we examine optimal dynamic policies in an open economy where technology is endogenously accumulated through R&D innovation. Our key insight is that a country has incentives to influence foreign innovation efforts across sectors and over time---giving rise to optimal policies even when the private innovation allocations are (Pareto) efficient. We derive explicit expressions for optimal taxes linked to both an intratemporal and an intertemporal motive to manipulate foreign technology. A country would want to levy higher tariffs in sectors in which it has a comparative advantage, at the same time invoking domestic innovation subsidies during transition. By contrast, optimal policies under exogenous technology call for uniform tariffs across sectors and no innovation policies.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w31703 (Browse shelf(Opens below))	Not For Loan

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September 2023.

What are a country's policy options in the face of emerging technologies development in a global economy? To answer this question, we examine optimal dynamic policies in an open economy where technology is endogenously accumulated through R&D innovation. Our key insight is that a country has incentives to influence foreign innovation efforts across sectors and over time---giving rise to optimal policies even when the private innovation allocations are (Pareto) efficient. We derive explicit expressions for optimal taxes linked to both an intratemporal and an intertemporal motive to manipulate foreign technology. A country would want to levy higher tariffs in sectors in which it has a comparative advantage, at the same time invoking domestic innovation subsidies during transition. By contrast, optimal policies under exogenous technology call for uniform tariffs across sectors and no innovation policies.