Affiliation:
1. Department of Economics University of Toronto Toronto Ontario Canada
2. Department of Economics Duke University Durham North Carolina U.S.A
3. National Bureau of Economic Research Boston Massachusetts U.S.A
Abstract
This article develops and estimates an industry equilibrium model of the Korean electric motor industry from 1991 to 1996. Plant‐level decisions on R&D, physical capital investment, entry, and exit are integrated in a dynamic setting with knowledge spillovers. We apply the novel approximation of oblivious equilibrium to estimate the R&D cost, magnitude of knowledge spillovers, adjustment costs of physical investment, and plant scrap value distribution. Knowledge spillovers are essential to explaining the firm‐level productivity evolution and the equilibrium market configuration. A R&D subsidy maximizes industry output and is broadly consistent with a past policy initiative of the Korean government.
Subject
Economics and Econometrics,General Business, Management and Accounting,Accounting
Cited by
4 articles.
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