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Evaluating innovation policy: a structural treatment effect model of R&D subsidies

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Author Info

  • Takalo, Tuomas

    ()
    (Bank of Finland Research)

  • Tanayama, Tanja

    ()
    (HECER, University of Helsinki)

  • Toivanen, Otto

    ()
    (HECER, University of Helsinki)

Abstract

This paper studies the welfare effects of R&D subsidies. We develop a model of continuous optimal treatment with outcome heterogeneity where the treatment outcome depends on applicant investment. The model takes into account heterogeneous application costs and identifies the treatment effect on the public agency running the programme. Under the assumption of a welfare-maximizing agency, we identify general equilibrium treatment effects. Applyiing our model to R&D project-level data we find substantial treatment effect heterogeneity. Agency-specific treatment effects are smaller than private treatment effects. We find that the rate of return on subsidies for the agency is 30–50%.

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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 7/2008.

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Length: 59 pages
Date of creation: 11 Mar 2008
Date of revision:
Publication status: Published as Takalo, Tuomas, Tanja Tanayama and Otto Toivanen, 'Evaluating innovation policy: a structural treatment effect model of R&D subsidies' in Review of Economics and Statistics , 2013, pages 255-272.
Handle: RePEc:hhs:bofrdp:2008_007

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: applications; effort; investment; R&D; selection; subsidies; treatment programme; treatment effects; welfare;

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References

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Citations

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Cited by:
  1. Tuomas Takalo, 2012. "Rationales and Instruments for Public Innovation Policies," Journal of Reviews on Global Economics, Lifescience Global, vol. 1, pages 157-167.
  2. Elena Huergo & Mayte Trenado, 2010. "The Application for and the Awarding of Low-Interest Credits to Finance R&D Projects," Review of Industrial Organization, Springer, vol. 37(3), pages 237-259, November.
  3. Chiara Criscuolo & Ralf Martin & Henry Overman & John Van Reenen, 2012. "The Causal Effects of an Industrial Policy," NBER Working Papers 17842, National Bureau of Economic Research, Inc.
  4. Dezhina, I. & Simachev, Yu., 2013. "Matching Grants for Stimulating Partnerships between Companies and Universities in Innovation Area: Initial Effects in Russia," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 99-122.
  5. Dezhina, Irina & Simachev, Yuri, 2012. "Partnering universities and companies in Russia: effects of new government initiative," MPRA Paper 43622, University Library of Munich, Germany.
  6. Correa, Paulo & Andres, Luis & Borja-Vega, Christian, 2013. "The impact of government support on firm R&D investments : a meta-analysis," Policy Research Working Paper Series 6532, The World Bank.
  7. Aschhoff, Birgit, 2009. "Who Gets the Money? The Dynamics of R&D Project Subsidies in Germany," ZEW Discussion Papers 08-018 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Hud, Martin & Hussinger, Katrin, 2014. "The impact of R&D subsidies during the crisis," ZEW Discussion Papers 14-024, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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