| Summary: | 碩士 === 國立高雄大學 === 經營管理研究所 === 99 === This article focuses on the influence to the social welfare before and after signing free trade agreement. We following the non-actionable subsidies of the norms of WTO in R＆D subsidy to analyze the cases on the effect of social welfare. Case 1: after signing FTA, the government and uncompetitive firm both stay in inertia state. Case 2: the uncompetitive firm struggle alone by investing R＆D to raise its own competition. Case 3: the government adopts R＆D subsidy measures.
We find that FTA can improve the profit of domestic exporting firm, consumer surplus, as well as social welfare. However, domestic uncompetitive firm will harmed according to the degrees of product homogeneous. We also find that domestic uncompetitive firm can improve their competitive status by R&D investment after signing FTA. In addition, we also find that the uncompetitive firm belongs to the different industry may modify its goal strategically to improve its own profit and social welfare.
Finally, we discover that home country government has no necessity to subsidize the uncompetitive firm after signing FTA under the consideration of social welfare maximization. Instead she should even levy tax on the uncompetitive firm in a specific industry condition. We conclude that home country government should subsidize (tax) the uncompetitive firm’s R&D expenditure if it engages in R&D activities for enhancing domestic social welfare. Compare the social welfare of the three cases in this article, Case 3 is the best measure.
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