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Evaluating innovation policy : a structural treatment effect model of R&D subsidies

Listed author(s):
  • Takalo, Tuomas
  • Tanayama, Tanja
  • Toivanen, Otto

This paper studies the welfare effects of R&D subsidies. We develop a model of continuous optimal treatment with outcome heterogeneity where the treatment outcome depends on applicant investment. The model takes into account heterogeneous application costs and identifies the treatment effect on the public agency running the programme. Under the assumption of a welfare-maximizing agency, we identify general equilibrium treatment effects. Applyiing our model to R&D project-level data we find substantial treatment effect heterogeneity. Agency-specific treatment effects are smaller than private treatment effects. We find that the rate of return on subsidies for the agency is 30-50%. Keywords: applications, effort, investment, R&D, selection, subsidies, treatment programme, treatment effects, welfare JEL classification numbers: 038, 031, L53, C31

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File URL: https://helda.helsinki.fi/bof/bitstream/123456789/7492/1/157657.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 7/2008.

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Date of creation: 2008
Publication status: Published in Published in Review of Economics and Statistics, March 2013, Vol. 95, No. 1, Pages 255-272
Handle: RePEc:bof:bofrdp:2008_007
Contact details of provider: Postal:
Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland

Web page: http://www.suomenpankki.fi/en/

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