Estimating the local average treatment effect of R&D subsidies in a pan-European program

Paul Hünermund and Dirk Czarnitzki

No 16-039, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate the effect of Europe's largest multilateral subsidy program for R&D-performing, small and medium-sized enterprises on firm growth. The program was organized under a specific budget allocation rule, referred to as Virtual Common Pot (VCP), which is designed to avoid cross-subsidization between participating countries. This rule creates exogenous variation in treatment status and allows us to identify the local average treatment effect of public R&D grants. In addition, we compare the program's effect under the VCP rule with the standard situation of a Real Common Pot (RCP), where program authorities allocate a single budget according to uniform project evaluation criteria. Our estimates suggest no average effect of grants on firm growth but treatment effects are heterogeneous and increase with project quality. A Real Common Pot would have reduced the cost of policy-induced job creation by 27%. We discuss the implications of our findings for the coordination of national policy programs within the European Research Area.

Keywords: Joint Programming Iniatives; R&D Policy; Virtual Common Pot; Instrumental Variable Estimation; European Research Area (search for similar items in EconPapers)
JEL-codes: C31 H25 O38 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/140627/1/858921715.pdf (application/pdf)

Related works:
Working Paper: Estimating the local average treatment effect of R&D subsidies in a pan-European program (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:16039

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().