Advanced Search
MyIDEAS: Login to save this paper or follow this series

Selection Or Self-Rejection? Applications Into A Treatment

Contents:

Author Info

  • Tuomas Takalo

    (Bank of Finland)

  • Tanja Tanayama

    (VTT Research)

  • Otto Toivanen

    (HECER)

Abstract

We develop a new method to estimate the returns to R&D, their distribution, and their determinants. We model a continuous optimal treatment with outcome heterogeneity, where the treatment outcome depends on the applicant’s investment. The model takes into account application costs, and isolates the effects of the treatment on the public agency running the treatment program. Under the assumption of a welfare-maximizing agency, we identify general equilibrium treatment effects and social returns to R&D. The model yields a restriction on the application equation that helps identify the parameters of the cost-of- application function. The proposed estimation strategy is applied to project level data from the granting process of R&D subsidies. We find that larger firms have higher marginal profitability of R&D. Rates of return on R&D are high and their distribution skew. Agency specific returns are non-monotonic in private returns. Project level spillovers are linear in R&D. The median increase from subsidies in the agency’s utility not appropriated by the applicant is 16 000€. Application costs increase with the profitability shock and ignoring application costs severely biases the estimated rates of return upwards.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://128.118.178.162/eps/io/papers/0510/0510002.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0510002.

as in new window
Length: 50 pages
Date of creation: 10 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0510002

Note: Type of Document - pdf; pages: 50
Contact details of provider:
Web page: http://128.118.178.162

Related research

Keywords: applications; effort; investment; rate of return; R&D; R&D return distribution selection; subsidies; treatment program; treatment effects; welfare;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers 95-4, Brown University, Department of Economics.
  2. Dehejia, Rajeev H., 2005. "Program evaluation as a decision problem," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 141-173.
  3. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "General Equilibrium Treatment Effects: A Study of Tuition Policy," NBER Working Papers 6426, National Bureau of Economic Research, Inc.
  4. Paul A. David, Bronwyn H. Hall and Andrew A. Toole., 1999. "Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence," Economics Working Papers E99-269, University of California at Berkeley.
  5. Lanjouw, Jean Olson, 1998. "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 671-710, October.
  6. Richard C. Levin & Peter C. Reiss, 1988. "Cost-Reducing and Demand-Creating R&D with Spillovers," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 538-556, Winter.
  7. Heckman, James J & Smith, Jeffrey A., 2003. "The determinants of participation in a social program: Evidence from a prototypical job training program," Working Paper Series 2003:10, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Carl Davidson & Stephen A. Woodbury, . "The Displacement Effect of Reemployment Bonus Programs," Upjohn Working Papers and Journal Articles cdsaw1993, W.E. Upjohn Institute for Employment Research.
  9. Blanes, J. Vicente & Busom, Isabel, 2004. "Who participates in R&D subsidy programs?: The case of Spanish manufacturing firms," Research Policy, Elsevier, vol. 33(10), pages 1459-1476, December.
  10. Bronwyn H. Hall, 2003. "The Financing of Research and Development," Finance 0303003, EconWPA.
  11. Adam B. Jaffe, 2002. "Building Programme Evaluation into the Design of Public Research-Support Programmes," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 22-34, Spring.
  12. Rebecca Henderson & Iain Cockburn, . "Scale, Scope and Spillovers: The Determinants of Research Productivity in Drug Discovery," Working Papers ec25/94, Department of Economics, University of Lancaster.
  13. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
  14. Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, vol. 72(3), pages 285-318, July.
  15. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  16. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc.
  17. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  18. Gagnepain, Philippe & Ivaldi, Marc, 1999. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," IDEI Working Papers 84, Institut d'Économie Industrielle (IDEI), Toulouse.
  19. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October.
  20. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
  21. Segerstrom, Paul S., 1998. "The Long-Run Growth Effects of R&D Subsidies," Working Paper Series 506, Research Institute of Industrial Economics.
  22. James Heckman, 1997. "Instrumental Variables: A Study of Implicit Behavioral Assumptions Used in Making Program Evaluations," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 441-462.
  23. repec:fth:bfdipa:5/2000 is not listed on IDEAS
  24. Zvi Griliches, 1958. "Research Costs and Social Returns: Hybrid Corn and Related Innovations," Journal of Political Economy, University of Chicago Press, vol. 66, pages 419.
  25. Mitali Das & Whitney K. Newey & Francis Vella, 2003. "Nonparametric Estimation of Sample Selection Models," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 33-58.
  26. Lechner, Michael, 1999. "Identification and Estimation of Causal Effects of Multiple Treatments Under the Conditional Independence Assumption," IZA Discussion Papers 91, Institute for the Study of Labor (IZA).
  27. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 221-40, May.
  28. Tor Jakob Klette & Jarle Møen & Zvi Griliches, 1999. "Do Subsidies to Commercial R&D Reduce Market Failures? Microeconomic Evaluation Studies," NBER Working Papers 6947, National Bureau of Economic Research, Inc.
  29. Richard Blundell & Monica Costa Dias, 2002. "Alternative approaches to evaluation in empirical microeconomics," CeMMAP working papers CWP10/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  30. Heckman, James J & Heinrich, Carolyn & Smith, Jeffrey, 1997. "Assessing the Performance of Performance Standards in Public Bureaucracies," American Economic Review, American Economic Association, vol. 87(2), pages 389-95, May.
  31. Kuismanen, Mika, 2000. "Labour Supply and Income Tax Changes: A Simulation Study for Finland," Research Discussion Papers 5/2000, Bank of Finland.
  32. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
  33. Jan Eeckhout & Boyan Jovanovic, 2002. "Knowledge Spillovers and Inequality," American Economic Review, American Economic Association, vol. 92(5), pages 1290-1307, December.
  34. Scherer, F. M. & Harhoff, Dietmar, 2000. "Technology policy for a world of skew-distributed outcomes," Research Policy, Elsevier, vol. 29(4-5), pages 559-566, April.
  35. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
  36. Guido W. Imbens, 1999. "The Role of the Propensity Score in Estimating Dose-Response Functions," NBER Technical Working Papers 0237, National Bureau of Economic Research, Inc.
  37. Pakes, Ariel S, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," Econometrica, Econometric Society, vol. 54(4), pages 755-84, July.
  38. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
  39. R. Blaine Roberts & G.S. Maddala & Gregory Enholm, 1978. "Determinants of the Requested Rate of Return and the Rate of Return Granted in a Formal Regulatory Process," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 611-621, Autumn.
  40. Manski, Charles F., 2000. "Identification problems and decisions under ambiguity: Empirical analysis of treatment response and normative analysis of treatment choice," Journal of Econometrics, Elsevier, vol. 95(2), pages 415-442, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bernd Ebersberger, 2011. "Public funding for innovation and the exit of firms," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 519-543, August.
  2. Katrin Hussinger, 2008. "R&D and subsidies at the firm level: an application of parametric and semiparametric two-step selection models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 729-747.
  3. Daniel Chudnovsky & Andrés López & Martín Rossi & Diego Ubfal, 2006. "Evaluating A Program of Public Funding of Private Innovation Activities. An Econometric Study of FONTAR in Argentina," OVE Working Papers 1606, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0510002. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.