The link between public support and private r&d effort: what is the optimal subsidy?

Néstor Duch-Brown (), Jose Garcia-Quevedo and Daniel Montolio
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Néstor Duch-Brown: Universitat de Barcelona & IEB
Authors registered in the RePEc Author Service: Néstor Duch Brown

No 2011/12, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: The effectiveness of R&D subsidies can vary substantially depending on their characteristics. Specifically, the amount and intensity of such subsidies are crucial issues in the design of public schemes supporting private R&D. Public agencies determine the intensities of R&D subsidies for firms in line with their eligibility criteria, although assessing the effects of R&D projects accurately is far from straightforward. The main aim of this paper is to examine whether there is an optimal intensity for R&D subsidies through an analysis of their impact on private R&D effort. We examine the decisions of a public agency to grant subsidies taking into account not only the characteristics of the firms but also, as few previous studies have done to date, those of the R&D projects. In determining the optimal subsidy we use both parametric and non-parametric techniques. The results show a non-linear relationship between the percentage of subsidy received and the firms’ R&D effort. These results have implications for technology policy, particularly for the design of R&D subsidies that ensure enhanced effectiveness.

Keywords: R&D; public subsidies; evaluation (search for similar items in EconPapers)
JEL-codes: H32 O38 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011
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Citations: View citations in EconPapers (8)

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