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Misappropriation of R&D subsidies: Estimating treatment effects with one-sided noncompliance

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  • Boeing, Philipp
  • Peters, Bettina

Abstract

We investigate the misappropriation of R&D subsidies and evaluate its consequences for policy effectiveness. Using Chinese firm-level data for 2001-2011, we identify that 42% of grantees misused R&D subsidies, accounting for 53% of total R&D subsidies. Misappropriation leads to a substantial loss of the causal impact of R&D subsidies, as measured by the difference of the intention-to-treat effect and complier average causal effect. Results show that R&D expenditures could have been stimulated beyond the subsidy amount (additionality), but noncompliance has resulted in medium-level partial crowding out. Overall, misappropriation has reduced the effectiveness of China’s R&D policy by more than half.

Suggested Citation

  • Boeing, Philipp & Peters, Bettina, 2022. "Misappropriation of R&D subsidies: Estimating treatment effects with one-sided noncompliance," ZEW Discussion Papers 21-081, ZEW - Leibniz Centre for European Economic Research, revised 2022.
    • Handle: RePEc:zbw:zewdip:21081
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    References listed on IDEAS

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    1. Zhen Sun & Zhen Lei & Zhifeng Yin, 2018. "Innovation policy in China: nationally promulgated but locally implemented," Applied Economics Letters, Taylor & Francis Journals, vol. 25(21), pages 1481-1486, December.
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    Cited by:

    1. Boxu Yang & Xielin Liu & Yuchen Gao & Langmei Zhu, 2023. "A research on the effectiveness of innovation policy for regional innovation under Chinese long-range plan," Science and Public Policy, Oxford University Press, vol. 50(3), pages 491-508.
    2. Andrea Simone, 2023. "What Drives Technological Change in Regions? Relatedness and R&D Subsidies in the US from 1981 to 2010," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 114(2), pages 133-156, April.
    3. Boeing, Philipp & Peters, Bettina, 2021. "A new China shock? The untold story of China's R&D subsidies," ZEW Expert Briefs 21-10, ZEW - Leibniz Centre for European Economic Research.
    4. Agnes Kügler & Klaus Friesenbichler & Jürgen Janger, 2023. "Innovationen und Investitionen österreichischer Unternehmen in der Krise," WIFO Studies, WIFO, number 70681, April.

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    More about this item

    Keywords

    R&D subsidies; policy evaluation; misappropriation; China;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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