Industrial policy and firm heterogeneity

Pedro P. Barros, Tore Nilssen

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


Our concern in this paper is with firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises as to which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D technologies in two distinct ways: in the costs of performing R&D activities and in the output obtained from such activities. We find that the optimal firm-specific industrial policy is affected differently by the two sources of firm heterogeneity. Furthermore, a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm.

Original languageEnglish
Pages (from-to)597-616
Number of pages20
JournalScandinavian Journal Of Economics
Issue number4
Publication statusPublished - 1999


  • Firm heterogeneity
  • Industrial policy
  • R&D


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