Does public R&D funding crowd-in private R&D investment? Evidence from military R&D expenditures for US states

Gianluca Pallante, Emanuele Russo and Andrea Roventini

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: Military Research and Development (R&D) expenditures arguably represent one of the main innovation policy levers for US policy makers. They are sizeable, with a clear-cut public purpose (national defense) and with the government being their exclusive buyer. Exploiting a longitudinal dataset linking public R&D obligations to private R&D expenditures for US states, we investigate the impact of defense R&D on privately-financed R&D. To address po- tential endogeneity in the allocation of funds, we use an instrumental variable identification strategy leveraging the differential exposure of US states to national shocks in federal military R&D. We document considerable "crowding-in" effects with elasticities in the 0.11-0.14 range. These positive effects extend also to the labor market, when focusing on employment in selected R&D intensive industries and especially for engineers.

Keywords: R&D; Innovation policy; Defense; Mission-oriented innovation. (search for similar items in EconPapers)
Date: 2020-11-12
New Economics Papers: this item is included in nep-cse, nep-ino and nep-tid
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Citations: View citations in EconPapers (6)

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Journal Article: Does public R&D funding crowd-in private R&D investment? Evidence from military R&D expenditures for US states (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2020/32

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