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Modelling and measuring the effects of public subsidies on business R&D: theoretical and econometric issues

Abstract

It is the aim of this paper to review the principal econometric models used so far to measure the effect of government’s support to private R&D expenditure; in order to reach this task, we first present a basic theoretical framework to identify the effects of public subsidies on business R&D, going on by extending it to the case of dynamic complementarities and presence of subsidy spillovers. The review of the econometric models, the core of the paper, starts from section 4. We first classify econometric models according to three dimensions: 1. structural (based on a system of equations) and non-structural (based on a reduced-form equation and, possibly, a counterfactual) models; 2. models using the subsidy variable in a continuous or in a binary form; and finally, 3. studies exploiting a cross-section versus a longitudinal (panel data) structure. The final part of the paper is an original contribution providing some guidelines to implement R&D policy evaluation in a dynamic subsidization setting.

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Paper provided by Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY in its series CERIS Working Paper with number 200803.

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Length: 49 pages
Date of creation: Jun 2008
Handle: RePEc:csc:cerisp:200803
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Keywords: business R&D; public incentives; econometric evaluation; dynamic treatment;

Find related papers by 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
  • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
  • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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Cited by:

  1. Dezhina, I. & Simachev, Yu., 2013. "Matching Grants for Stimulating Partnerships between Companies and Universities in Innovation Area: Initial Effects in Russia," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 99-122.

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