HIGH-TECHNOLOGY SUBSIDIES IN GENERAL EQUILIBRIUM - A SECTOR-SPECIFIC APPROACH

We use a specific-factor model to examine the conditions under which p olicy-makers are able to increase aggregate production of high-tech go ods by production or R&D-subsidies in the short and long run. The diff iculties for the policy-maker in designing a subsidy scheme that succe eds in expanding aggregate high-tech production involve taking into ac count the trade-off between resources used in R&D and production of hi gh-tech goods, the relative impact of different R&D activities on prod uctivity, and the ease with which resources may be attracted from the non-high-tech sector of the economy to the various high-tech industrie s.