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Sunk costs, extensive R&D subsidies and permanent inducement effects

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  • Pere Arqué-Castells
  • Pierre Mohnen

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Abstract

We study whether there is scope for using subsidies to smooth out barriers to R&D performance and expand the share of R&D firms in Spain. We consider a dynamic model with sunk entry costs in which firms’ optimal participation strategy is defined in terms of two subsidy thresholds that characterise entry and continuation. We compute the subsidy thresholds from the estimates of a dynamic panel data type-2 tobit model for an unbalanced panel of about 2,000 Spanish manufacturing firms. The results suggest that “extensive” subsidies are a feasible and efficient tool for expanding the share of R&D firms. Est-il possible à l’aide de subsides à la recherche d’augmenter, non pas l’intensité de la recherche dans les firmes qui en font déjà, mais le nombre de firmes qui font de la recherche? Tel est l’objet de cet article. Nous élaborons un modèle dynamique avec des coûts irrécupérables dans lequel il y a deux seuils de subsides, un au-delà duquel les firmes s’engagent à faire de la recherche et un autre au-delà duquel les firmes continuent à faire de la recherche. Nous estimons ces seuils à l’aide d’un modèle tobit type II dynamique et des données d’un panel non-cylindré de 2000 firmes manufacturières espagnoles. Les résultats suggèrent que les subsides à la recherche forment un moyen efficace d’amener plus de firmes à faire de la recherche.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2012s-09.

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Date of creation: 01 Apr 2012
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Handle: RePEc:cir:cirwor:2012s-09

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Keywords: R&D; persistence; subsidies; dynamic models; R&D; persistance; subventions; modèles dynamiques;

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  1. Raymond Wladimir & Mohnen, Pierre & Palm, Franz & Schim, van der Loeff, Sybrand, 2006. "Persistence of Innovation in Dutch Manufacturing: Is it Spurious?," Research Memorandum 009, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
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  11. Paul A. David & Bronwyn H. Hall & Andrew A. Toole, 1999. "Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence," NBER Working Papers 7373, National Bureau of Economic Research, Inc.
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  14. Birgit Aschhoff, 2010. "Who Gets the Money? The Dynamics of R&D Project Subsidies in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(5), pages 522-546, October.
  15. Blanes, J. Vicente & Busom, Isabel, 2004. "Who participates in R&D subsidy programs?: The case of Spanish manufacturing firms," Research Policy, Elsevier, vol. 33(10), pages 1459-1476, December.
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  19. Klette, T.J. & Moen, J. & Griliches, Z., 1999. "Do Subsidies to Commercial R&D Reduce Market Failures? Microeconometric Evaluation Studies," Papers 16/99, Norwegian School of Economics and Business Administration-.
  20. Malerba, Franco & Orsenigo, Luigi, 1999. "Technological entry, exit and survival: an empirical analysis of patent data," Research Policy, Elsevier, vol. 28(6), pages 643-660, August.
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