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The Effect of R&D Subsidies on Private R&D

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  • HOLGER GORG
  • ERIC STROBL

Abstract

This paper investigates the relationship between government support for R&D and R&D expenditure financed privately by firms using a comprehensive plant level data set for the manufacturing sector in the Republic of Ireland. We find that for domestic plants small grants serve to increase private R&D spending, while too large a grant may crowd out private financing of R&D. In contrast, evidence for foreign establishments suggests that grant provision causes neither additionality nor crowding out effects of private R&D financing, regardless of the size of the subsidy. Copyright (c) The London School of Economics and Political Science 2006.

Suggested Citation

  • Holger Gorg & Eric Strobl, 2007. "The Effect of R&D Subsidies on Private R&D," Economica, London School of Economics and Political Science, vol. 74(294), pages 215-234, May.
  • Handle: RePEc:bla:econom:v:74:y:2007:i:294:p:215-234
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