How to Allocate R&D (and Other) Subsidies: An Experimentally Tested Policy Recommendation

Thomas Giebe (), Tim Grebe () and Elmar Wolfstetter ()

No 108, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: This paper evaluates how R&D subsidies to the business sector are typically awarded. We identify two sources of ine_ciency: the selection based on a ranking of individual projects, rather than complete allocations, and the failure to induce competition among applicants in order to extract and use information about the necessary funding. In order to correct these ine_- ciencies we propose mechanisms that include some form of an auction in which applicants bid for subsidies. Our proposals are tested in a simulation and in controlled lab experiments. The results suggest that adopting our proposals may considerably improve the allocation.

Keywords: Research; Subsidies; Experimental Economics (search for similar items in EconPapers)
JEL-codes: D44 D45 H25 O32 O38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-exp, nep-ino and nep-pbe
Date: 2005-10
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Related works:
Journal Article: How to allocate R&D (and other) subsidies: An experimentally tested policy recommendation (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:trf:wpaper:108

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