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The Effect of R&D Subsidies on Private R&D: Evidence from Italian Manufacturing Data

This paper uses a comprehensive firm level data set for the manufacturing sector in Italy to investigate the effect of government support on privately financed R&D expenditure. Estimates from a two-step equation model suggest that public assistance has a positive effect on private R&D investment. A non parametric matching procedure is also used to investigate the same effect. Here again the results suggest that the recipient firms achieve more private R&D than they would have without public support. The paper also examines whether public funding effects the financial sources available for R&D and finds that grants encourage credit financing for R&D. The effects on the use of internal sources are not conclusive.

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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200815.

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Date of creation: 2008
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Handle: RePEc:cns:cnscwp:200815
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