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Evaluating the robustness of the effect of public subsidies on firms’ R&D: an application to Italy

This paper applies different econometric methods to evaluate the effect of public subsidies on firms’ R&D activity. For the sake of robustness, results from the Heckman selection model (Heckit), Control-function regression, Difference-in-differences, and various Matching methods are compared by using the third and fourth wave of the Italian Community Innovation Survey (CIS3, years 1998-2000 and CIS4, years 2002-2004). We predict the absence of a full crowding-out of private R&D performance, both for the whole sample and for some subsets of firms. Nevertheless, we conclude that while for variables expressed as ratio (R&D intensity and R&D per employee) the difference in results is negligible, R&D expenditure presents a strong variability among the approaches, even for those relying on similar identification assumptions. Given the utmost importance of this target-variable, future works should go beyond the use of single methods, especially when they are thought of to steer future policymaking.

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Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): XV (2012)
Issue (Month): (November)
Pages: 287-320

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Handle: RePEc:cem:jaecon:v:15:y:2012:n:2:p:287-320
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