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Evaluating The Impacts Of Subsidies On Innovation Activities In Germany

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  • Reinhard Hujer
  • Dubravko Radić

Abstract

Innovations are a key factor to ensure the competitiveness of establishments as well as to enhance the growth and wealth of nations. But more than any other economic activity, decisions about innovations are plagued by failures of the market mechanism. As a response, public instruments have been implemented to stimulate private innovation activities. The effectiveness of these measures, however, is ambiguous and calls for an empirical evaluation. In this paper we make use of the IAB Establishment Panel and apply various microeconometric methods to estimate the effect of public measures on innovation activities of German establishments. We find that neglecting sample selection due to observable as well as to unobservable characteristics leads to an overestimation of the treatment effect and that there are considerable differences with regard to size class and between West and East German establishments.

Suggested Citation

  • Reinhard Hujer & Dubravko Radić, 2005. "Evaluating The Impacts Of Subsidies On Innovation Activities In Germany," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 565-586, September.
    • Handle: RePEc:bla:scotjp:v:52:y:2005:i:4:p:565-586
    DOI: 10.1111/j.1467-9485.2005.00356.x
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    References listed on IDEAS

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    1. Andreas Fier & Dietmar Harhoff, 2002. "Die Evolution der bundesdeutschen Forschungs– und Technologiepolitik: Rückblick und Bestandsaufnahme," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(3), pages 279-301, August.
    2. Almus, Matthias & Czarnitzki, Dirk, 2003. "The Effects of Public R&D Subsidies on Firms' Innovation Activities: The Case of Eastern Germany," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(2), pages 226-236, April.
    3. Hujer, Reinhard & Caliendo, Marco & Radic, Dubravko, 2002. "Skill Biased Technological and Organizational Change: Estimating a Mixed Simultaneous Equation Model Using the IAB Establishment Panel," IZA Discussion Papers 566, Institute of Labor Economics (IZA).
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