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Sunk costs, extensive R&D subsidies and permanent inducement effects


  • Pere Arqué-Castells
  • Pierre Mohnen


We study whether there is scope for using subsidies to smooth out barriers to R&D performance and expand the share of R&D firms in Spain. We consider a dynamic model with sunk entry costs in which firms' optimal participation strategy is defined in terms of two subsidy thresholds that characterise entry and continuation. We compute the subsidy thresholds from the estimates of a dynamic panel data type-2 tobit model for an unbalanced panel of about 2,000 Spanish manufacturing firms. The results suggest that extensive subsidies are a feasible and efficient tool for expanding the share of R&D firms. Est-il possible à l'aide de subsides à la recherche d'augmenter, non pas l'intensité de la recherche dans les firmes qui en font déjà, mais le nombre de firmes qui font de la recherche? Tel est l'objet de cet article. Nous élaborons un modèle dynamique avec des coûts irrécupérables dans lequel il y a deux seuils de subsides, un au-delà duquel les firmes s'engagent à faire de la recherche et un autre au-delà duquel les firmes continuent à faire de la recherche. Nous estimons ces seuils à l'aide d'un modèle tobit type II dynamique et des données d'un panel non-cylindré de 2000 firmes manufacturières espagnoles. Les résultats suggèrent que les subsides à la recherche forment un moyen efficace d'amener plus de firmes à faire de la recherche.

Suggested Citation

  • Pere Arqué-Castells & Pierre Mohnen, 2012. "Sunk costs, extensive R&D subsidies and permanent inducement effects," CIRANO Working Papers 2012s-09, CIRANO.
  • Handle: RePEc:cir:cirwor:2012s-09

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    References listed on IDEAS

    1. David, Paul A. & Hall, Bronwyn H. & Toole, Andrew A., 2000. "Is public R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier, vol. 29(4-5), pages 497-529, April.
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    Cited by:

    1. Koehler, Mila & Peters, Bettina, 2017. "Subsidized and non-subsidized R&D projects: Do they differ?," ZEW Discussion Papers 17-042, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Isabel Busom & Beatriz Corchuelo & Ester Martínez-Ros, 2017. "Participation inertia in R&D tax incentive and subsidy programs," Small Business Economics, Springer, vol. 48(1), pages 153-177, January.
    3. repec:kap:sbusec:v:50:y:2018:i:1:d:10.1007_s11187-017-9877-3 is not listed on IDEAS
    4. repec:eee:wdevel:v:99:y:2017:i:c:p:75-94 is not listed on IDEAS
    5. Huergo, Elena & Trenado, Mayte & Ubierna, Andrés, 2016. "The impact of public support on firm propensity to engage in R&D: Spanish experience," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 206-219.
    6. André Spithoven, Belgian Science Policy Office and Ghent University & Michel Dumont & Peter Teirlinck, Belgian Science Policy Office and KU Leuven, 2014. "Working Paper 08-14 - Public support for R&D and the educational mix of R&D employees," Working Papers 1408, Federal Planning Bureau, Belgium.
    7. repec:oup:oxecpp:v:69:y:2017:i:4:p:1032-1053. is not listed on IDEAS
    8. repec:eee:respol:v:46:y:2017:i:10:p:1851-1862 is not listed on IDEAS

    More about this item


    R&D; persistence; subsidies; dynamic models; R&D; persistance; subventions; modèles dynamiques;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D2 - Microeconomics - - Production and Organizations

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