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Are Incentives For R&D Effective? Evidence From A Regression Discontinuity Approach

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  • Raffaello Bronzini
  • Eleonora Iachini

Abstract

This paper contributes to the literature on the effectiveness of R&D incentives by evaluating a unique investment subsidy program implemented in northern Italy. Firms were invited to submit proposals for new projects and only those that scored above a certain threshold received the subsidy. We use a sharp regression discontinuity design to compare investment spending of subsidized firms just above the cut-off score with spending by firms just below the cut-off. For the sample as a whole we find no significant increase in investment as a result of the program. This overall effect, however, masks substantial heterogeneity in the program’s impact. On average, we estimate that small enterprises increased their investments by about the amount of the subsidy they received from the program, whereas for larger firms the subsidies appear to have had no additional effect.

Suggested Citation

  • Raffaello Bronzini & Eleonora Iachini, 2012. "Are Incentives For R&D Effective? Evidence From A Regression Discontinuity Approach," ERSA conference papers ersa12p848, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa12p848
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    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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