Government Subsidies to Private Military R&D Investment: DOD's IR&D Policy
AbstractA relatively obscure defense procurement policy establishes a large subsidy to private military R&D investment. On the surface, it appears that the marginal subsidy to such investment is zero, but this is only true in the short run. Due to DOD's policy of allowable-cost determination, the long-run subsidy is substantial. It is much larger, in fact, than the subsidy provided by the R&D Tax Credit enacted in 1981. I calculate the subsidy by estimating an econometric model using contractor-level data from the Defense Contract Audit Agency. This subsidy may have an important influence on the amount and character of privately financed innovation in the U.S.
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Date of creation: Jun 1990
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Other versions of this item:
- Lichtenberg, F.R., 1988. "Government Subsidies To Private Military R&D Investmen: Dod'S Ir&D Policy," Papers fb-_88-01, Columbia - Graduate School of Business.
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- Lichtenberg, Frank R, 1988. "The Private R&D Investment Response to Federal Design and Technical Competitions," American Economic Review, American Economic Association, vol. 78(3), pages 550-59, June.
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- William P. Rogerson, 1993. "Economic Incentives and the Defense Procurement Process," Discussion Papers 1078, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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