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

Pere Arqué-Castells () and Pierre Mohnen
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Pere Arqué-Castells: Universitat Autònoma de Barcelona & IEB

No 2012/13, Working Papers from Institut d'Economia de Barcelona (IEB)

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 characterise 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: C1 D2 H2 O2 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2012
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Citations: View citations in EconPapers (10)

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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)
Working Paper: Sunk costs, extensive R&D subsidies and permanent inducement effects (2012)
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