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

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  • 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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File URL: http://www.ieb.ub.edu/aplicacio/fitxers/2011/6/Doc2011-12.pdf
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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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  1. Oliver LINTON, . "Applied nonparametric methods," Statistic und Oekonometrie 9312, Humboldt Universitaet Berlin.
  2. HÄRDLE, Wolfgang, 1992. "Applied nonparametric methods," CORE Discussion Papers 1992003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  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.
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Cited by:
  1. 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.

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