Abstract
This paper examines the effects of rent‐extracting contingent tariffs in a two‐country model of R&D‐driven growth without scale effects where firms engage in both horizontal and vertical R&D activities. Unlike a semi‐endogenous growth model as Dinopoulos and Segerstrom (1999), government policies can have long‐run growth effects. Indeed, a permanent increase in the contingent tariff rate permanently increases or decreases the long‐run rate of economic growth. Our main results show that a weak form of tariff imposition comparing to Rivera‐Batiz and Romer (1991) sufficiently retards the whole technological progress in the existing industries in the world. The results derived in this paper also parallel to and complement Dinopoulos and Segerstrom (1999).
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