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The link between public support and private r&d effort: what is the optimal subsidy?

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Author Info

  • Néstor Duch-Brown

    ()
    (Universitat de Barcelona & IEB)

  • José García-Quevedo

    ()
    (Universitat de Barcelona & IEB)

  • Daniel Montolio

    ()
    (Universitat de Barcelona & IEB)

Abstract

The effectiveness of R&D subsidies can vary substantially depending on their characteristics. Specifically, the amount and intensity of such subsidies are crucial issues in the design of public schemes supporting private R&D. Public agencies determine the intensities of R&D subsidies for firms in line with their eligibility criteria, although assessing the effects of R&D projects accurately is far from straightforward. The main aim of this paper is to examine whether there is an optimal intensity for R&D subsidies through an analysis of their impact on private R&D effort. We examine the decisions of a public agency to grant subsidies taking into account not only the characteristics of the firms but also, as few previous studies have done to date, those of the R&D projects. In determining the optimal subsidy we use both parametric and non-parametric techniques. The results show a non-linear relationship between the percentage of subsidy received and the firms’ R&D effort. These results have implications for technology policy, particularly for the design of R&D subsidies that ensure enhanced effectiveness.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2011/12.

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Length: 38 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:ieb:wpaper:2011/6/doc2011-12

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Keywords: R&D; public subsidies; evaluation;

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References

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  1. Hardle, W., 1992. "Applied Nonparametric Methods," Papers 9206, Tilburg - Center for Economic Research.
  2. Xulia González & Jordi Jaumandreu & Consuelo Pazó, 2001. "Barriers to innovation and subsidy e¤ectiveness," Working Papers 0112, Universidade de Vigo, Departamento de Economía Aplicada.
  3. Chang-Yang Lee, 2002. "A simple model of R&D: An extension of the Dorfman-Steiner theorem," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 449-452.
  4. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
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Cited by:
  1. Anna Castañer & Mª Mercè Claramunt, 2014. "Optimal stop-loss reinsurance: a dependence analysis," Working Papers XREAP2014-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2014.
  2. Michel Dumont, 2013. "Working Paper 01-13 - The impact of subsidies and fiscal incentives on corporate R&D expenditures in Belgium (2001-2009)," Working Papers 1301, Federal Planning Bureau, Belgium.
  3. Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 43, July.

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