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: Department of Public Economy, Political Economy and Spanish Economy and Barcelona Institute of Economics (IEB), University of Barcelona. Av Diagonal 690. 08034 Barcelona (Spain)
Authors registered in the RePEc Author Service: Néstor Duch Brown

No XREAP2011-09, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

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 nonparametric 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: 45 pages
Date: 2011-06, Revised 2011-06
New Economics Papers: this item is included in nep-ino, nep-ppm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2011-09.pdf First version, 2011 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2011-09.pdf Revised version, 2011 (application/pdf)

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Working Paper: The link between public support and private r&d effort: what is the optimal subsidy? (2011)
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