Sophisticated arguments for Activist Trade policy The Case for Government Support of High Technology Industries Subsidize the activity with externalities, not all activities in an industry For instance, R&D(as opposed to manufacturing) should be subsidized How Important Are Externa lities? Externalities are hard to measure empirically Problems of appropriability at the level of the nation(as opposed to the firm) are less severe but still important even for a nation as large as the United States Copyright C 2003 Pearson Education, Inc Slide 11-6Copyright © 2003 Pearson Education, Inc. Slide 11-6 • The Case for Government Support of High￾Technology Industries – Subsidize the activity with externalities, not all activities in an industry. – For instance, R&D (as opposed to manufacturing) should be subsidized. • How Important Are Externalities? – Externalities are hard to measure empirically. – Problems of appropriability at the level of the nation (as opposed to the firm) are less severe but still important even for a nation as large as the United States. Sophisticated Arguments for Activist Trade Policy