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

Pere Arqué-Castells () and Pierre Mohnen
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Pere Arqué-Castells: Universitat de Barcelona, and Institut d’Economia de Barcelona

No 2012-029, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: 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 characterize 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.

Keywords: R&D; Persistence; Subsidies; Dynamic models (search for similar items in EconPapers)
JEL-codes: C15 D22 H25 O23 O31 O38 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Sunk Costs, Extensive R&D Subsidies and Permanent Inducement Effects (2015)
Working Paper: Sunk costs, extensive R&D subsidies and permanent inducement effects (2012)
Working Paper: Sunk costs, extensive R&D subsidies and permanent inducement effects (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2012029

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