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Internal and External Effects of R&D Subsidies and Fiscal Incentives: Empirical Evidence Using Spatial Dynamic Panel Models

  • Benjamin Montmartin

    University of Nice Sophia Antipolis, France)

  • Marcos Herrera

    National University of Salta, Argentina)

Most studies evaluating the macroeconomic effects of financial support policies on business-funded R&D use econometric methods that do not consider the existence of spatial effects, and generate biased estimates. In this paper, we discus and address this problem using spatial dynamic panel data methods. This allow us to provide new insights on the internal (in-country) and external (out-of-country) effects of both Research and Development (R&D) subsidies and fiscal incentives. We use a database of 25 OECD countries for the period 1990-2009. In relation to internal effects, for both instruments, we find a non-linear relationship between their effect on private R&D and their level (suggesting the possibility of leveraging and crowding-out effects). We also find a substitution effect between the R&D subsidies and fiscal incentives implemented within a country. Concerning the spatial component, we find evidence of positive spatial spillovers among private R&D investments. However, our results suggest the existence of competition/substitution effects between national R&D policies.

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Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2014-09.

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Length: 37 pages
Date of creation: Mar 2014
Date of revision:
Publication status: Published in Research Policy
Handle: RePEc:gre:wpaper:2014-09
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