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Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel

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Author Info
Lach, Saul

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Abstract

In evaluating the effect of an R&D subsidy we need to know what the subsidized firm would have spent on R&D had it not received the subsidy. Using data on Israeli manufacturing firms in the 1990s we find evidence suggesting that the R&D subsidies granted by the Ministry of Industry and Trade greatly stimulated company financed R&D expenditures for small firms but had a negative effect on the R&D of large firms, although not statistically significant. One subsidized New Israeli Shekel (NIS) induces 11 additional NIS of own R&D for the small firms. However, because most subsidies go to the large firms a subsidy of one NIS generates, on average, a statistically insignificant 0.23 additional NIS of company financed R&D. Copyright 2002 by Blackwell Publishing Ltd

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Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 50 (2002)
Issue (Month): 4 (December)
Pages: 369-90
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Handle: RePEc:bla:jindec:v:50:y:2002:i:4:p:369-90

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  2. James J. Heckman, 1995. "Instrumental Variables: A Cautionary Tale," NBER Technical Working Papers 0185, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Manuel Trajtenberg, 2000. "R&D Policy in Israel: An Overview and Reassessment," NBER Working Papers 7930, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  1. José Miguel Benavente & Gustavo Crespi & Alessandro Maffioli, 2007. "Public Support to Firm-Level Innovation: An Evaluation of the FONTEC Program," OVE Working Papers 0507, Inter-American Development Bank, Office of Evaluation and Oversight (OVE). [Downloadable!]
  2. Ari Hyytinen & Otto Toivanen, 2003. "Do Financial Constraints Hold Back Innovation and Growth? Evidence on the Role of Public Policy," Discussion Papers 820, The Research Institute of the Finnish Economy. [Downloadable!]
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  3. Holger Görg & Eric Strobl, 2005. "Do Government Subsidies Stimulate Training Expenditure? Microeconometric Evidence from Plant Level Data," IZA Discussion Papers 1606, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Aki Kangasharju, 2005. "Do Wages Subsidies Increase Employment in Subsidised Firms?," VATT Discussion Papers 378, Government Institute for Economic Research (VATT). [Downloadable!]
    Other versions:
  5. Takis Venetoklis, 2000. "Methods applied in evaluating business subsidy programs: A survey," VATT Discussion Papers 236, Government Institute for Economic Research (VATT). [Downloadable!]
  6. Asher Blass & Oved Yosha, 2003. "Financing R&D in mature companies: an empirical analysis," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(5), pages 425-447, October. [Downloadable!] (restricted)
  7. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Employment," Economics Working Papers 039, European Network of Economic Policy Research Institutes. [Downloadable!]
  8. Daniel Chudnovsky & Andrés López & Martín Rossi & Diego Ubfal, 2006. "Evaluating A Program of Public Funding of Private Innovation Activities. An Econometric Study of FONTAR in Argentina," OVE Working Papers 1606, Inter-American Development Bank, Office of Evaluation and Oversight (OVE). [Downloadable!]
  9. Manuel Trajtenberg, 2000. "R&D Policy in Israel: An Overview and Reassessment," NBER Working Papers 7930, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Jyrki Ali-Yrkkö, 2004. "Impact of Public R&D Financing on Private R&D - Does Financial Constraint Matter?," Discussion Papers 943, The Research Institute of the Finnish Economy. [Downloadable!]
  11. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Private R&D: Does Financial Constraint Matter?," Economics Working Papers 030, European Network of Economic Policy Research Institutes. [Downloadable!]
  12. Takis Venetoklis & Aki Kangasharju, 2002. "Business Subsidies and Employment of Firms: Overall Evaluation and Regional Extension," VATT Discussion Papers 268, Government Institute for Economic Research (VATT). [Downloadable!]
  13. Jyrki Ali-Yrkkö, 2005. "Impact of Public R&D Financing on Employment," Discussion Papers 980, The Research Institute of the Finnish Economy. [Downloadable!]
  14. Tommy Clausen, 2007. "Access (not) granted: What kinds of firms participate in technology programs?," Working Papers on Innovation Studies 20070612, Centre for Technology, Innovation and Culture, University of Oslo. [Downloadable!]
  15. Takis Venetoklis & Aki Kangasharju, 2003. "Do Wage-subsidies Increase Employment in Firms?," VATT Discussion Papers 304, Government Institute for Economic Research (VATT). [Downloadable!]
  16. Kangasharju, Aki & Venetoklis, Takis, 2002. "Effect of business subsidies on labour demand: overall evaluation with regional extensions," ERSA conference papers ersa02p172, European Regional Science Association. [Downloadable!]
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