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Barriers to Innovation and Subsidy Effectiveness

Author

Listed:
  • Xulia González

    () (Universidade de Vigo)

  • Jordi Jaumandreu

    () (Universidad Carlos III de Madrid)

  • Consuelo Pazo

    () (Universidade de Vigo)

Abstract

We explore the effects of subsidies by means of a model of firmsï¿• decisions about performing R&D when some government support can be expected. We estimate it with data on about 2,000 performing and nonperforming Spanish manufacturing firms. We compute the subsidies required to induce R&D spending,we detect the firms that would cease to perform R&D without subsidies, and assess the change in the privately financed effort. Results suggest that subsidies stimulate R&D and some firms would stop performing in their absence,b ut most actual subsidies go to firms that would have performed R&D otherwise. We find no crowding out of private funds.

Suggested Citation

  • Xulia González & Jordi Jaumandreu & Consuelo Pazo, 2005. "Barriers to Innovation and Subsidy Effectiveness," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 930-949, Winter.
  • Handle: RePEc:rje:randje:v:36:y:2005:4:p:930-949
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    References listed on IDEAS

    as
    1. Leung, Siu Fai & Yu, Shihti, 1996. "On the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 197-229.
    2. Klette, Tor Jakob & Moen, Jarle & Griliches, Zvi, 2000. "Do subsidies to commercial R&D reduce market failures? Microeconometric evaluation studies1," Research Policy, Elsevier, vol. 29(4-5), pages 471-495, April.
    3. Isabel Busom, 2000. "An Empirical Evaluation of The Effects of R&D Subsidies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(2), pages 111-148.
    4. Xulia Gonz·lez & Jordi Jaumandreu, "undated". "Threshold effects in product R&D decisions: theoretical framework and empirical analysis," Studies on the Spanish Economy 45, FEDEA.
    5. Nelson, Forrest D., 1977. "Censored regression models with unobserved, stochastic censoring thresholds," Journal of Econometrics, Elsevier, vol. 6(3), pages 309-327, November.
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    More about this item

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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