Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel

Saul Lach

Journal of Industrial Economics, 2002, vol. 50, issue 4, 369-390

Abstract: In evaluating the effect of an R&D subsidy we need to know what the subsidized firm would have spent on R&D had it not received the subsidy. Using data on Israeli manufacturing firms in the 1990s we find evidence suggesting that the R&D subsidies granted by the Ministry of Industry and Trade greatly stimulated company financed R&D expenditures for small firms but had a negative effect on the R&D of large firms, although not statistically significant. One subsidized New Israeli Shekel (NIS) induces 11 additional NIS of own R&D for the small firms. However, because most subsidies go to the large firms a subsidy of one NIS generates, on average, a statistically insignificant 0.23 additional NIS of company financed R&D.

Date: 2002
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https://doi.org/10.1111/1467-6451.00182

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Working Paper: Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel (2000)
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