The Misuse of China’s R&D Subsidies: Estimating Treatment Effects With One-Sided Noncompliance

Philipp Boeing and Bettina Peters

No 24-077, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate the misuse of R&D subsidies and evaluate its consequences for policy effectiveness. Developing a theoretical framework and using Chinese firm-level data for 2001-2011, we identify that 42% of grantees misappropriated R&D subsidies for non-R&D purposes, accounting for 53% of total R&D subsidies. Misuse leads to a substantial loss in the causal impact of R&D subsidies, as measured by the difference between the intention-to-treat and complier average causal effect. R&D expenditures could have been stimulated beyond the subsidy amount (additionality), but misuse (noncompliance) resulted in medium-level partial crowding out, reducing the effectiveness of China’s R&D policy by more than half.

Keywords: R&D subsidies; policy evaluation; misuse; China (search for similar items in EconPapers)
JEL-codes: C21 H21 O31 O38 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-mac, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:312195

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