Welfare effects of R&D support policies

Tuomas Takalo, Tanja Tanayama and Otto Toivanen

No 2/2022, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We construct a model of innovation incorporating R&D externalities, R&D participation, financial market imperfections, and application and allocation of R&D subsidies, estimate it using Finnish R&D project level data and conduct a welfare analysis. The intensive, not the extensive R&D margin is important. Financial market imperfections are small. Tax credits and subsidies do not reach first best R&D but increase R&D 29-47% compared to laissez-faire. Welfare effects are small: Tax credits increase welfare 1%; subsidies reduce welfare once application costs are taken into accout. In terms of fiscal cost, tax credits are 90% more expensive than R&D subsidies.

Keywords: R&D subsidies; R&D tax credits; extensive and intensive margin; financial market imperfections; welfare; counterfactual; economic growth (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/249598/1/BoF-DP-2202.pdf (application/pdf)

Related works:
Working Paper: Welfare Effects of R&D Support Policies (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2022_002

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().