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Can R&D subsidies counteract the economic crisis? – Macroeconomic effects in Germany


  • Brautzsch, Hans-Ulrich
  • Günther, Jutta
  • Loose, Brigitte
  • Ludwig, Udo
  • Nulsch, Nicole


During the economic crisis of 2008 and 2009, governments in Europe stabilized their economies by means of fiscal policy. After decades of absence, deficit spending was used to counteract the heavy decline in demand. In Germany, public spending went partially into R&D subsidies in favor of small and medium sized enterprises. Applying the standard open input–output model, the paper analyzes the macroeconomic effects of R&D subsidies on employment and production in the business cycle. Findings in the form of backward multipliers suggest that R&D subsidies have stimulated a substantial leverage effect. Almost two thirds of the costs of R&D projects are covered by the enterprises themselves. Overall, a subsidized R&D program results in a production, value added and employment effect that amounts to at least twice the initial financing. Overall, the R&D program counteracts the decline of GDP by 0.5% in the year 2009. In the year 2010 the effects are already procyclical since the German economy recovered quickly. Compared to the strongly discussed alternative uses of subsidies for private consumption, R&D spending is more effective.

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  • Brautzsch, Hans-Ulrich & Günther, Jutta & Loose, Brigitte & Ludwig, Udo & Nulsch, Nicole, 2015. "Can R&D subsidies counteract the economic crisis? – Macroeconomic effects in Germany," Research Policy, Elsevier, vol. 44(3), pages 623-633.
  • Handle: RePEc:eee:respol:v:44:y:2015:i:3:p:623-633 DOI: 10.1016/j.respol.2014.11.012

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    Cited by:

    1. repec:spr:epolin:v:44:y:2017:i:2:d:10.1007_s40812-016-0068-z is not listed on IDEAS
    2. Ghosh, Saibal, 2016. "Banker on board and innovative activity," Journal of Business Research, Elsevier, vol. 69(10), pages 4205-4214.
    3. Giebel, Marek & Kraft, Kornelius, 2017. "External financing constraints and firm's innovative activities during the financial crisis," ZEW Discussion Papers 17-064, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Kadri Männasoo & Jaanika Merikull, 2015. "The impact of firm financing constraints on R&D over the business cycle," Bank of Estonia Working Papers wp2015-3, Bank of Estonia, revised 30 Dec 2015.
    5. Katarzyna Zawalińska & Nhi Tran & Adam Płoszaj, 2016. "Planning R&D in a Post Centrally-Planned Economy: Assessing the Macroeconomic Effects in Poland," Centre of Policy Studies/IMPACT Centre Working Papers g-268, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Kadri Männasoo & Jaanika Meriküll, 2015. "The impact of firm financing constraints on R&D over the business cycle," Working Papers 348, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).


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