Internal and external effects of R&D subsidies and fiscal incentives: Empirical evidence using spatial dynamic panel models

Benjamin Montmartin and Marcos Herrera-Gómez

Research Policy, 2015, vol. 44, issue 5, 1065-1079

Abstract: Most studies evaluating the macroeconomic effects of financial support policies on business-funded R&D use econometric methods that do not consider the existence of spatial effects, and generate biased estimates. In this paper, we discus and address this problem using spatial dynamic panel data methods. This allow us to provide new insights on the internal (in-country) and external (out-of-country) effects of both Research and Development (R&D) subsidies and fiscal incentives. We use a database of 25 OECD countries for the period 1990–2009. In relation to internal effects, for both instruments, we find a non-linear relationship between their effect on private R&D and their level (suggesting the possibility of leveraging and crowding-out effects). We also find a substitution effect between the R&D subsidies and fiscal incentives implemented within a country. Concerning the spatial component, we find evidence of positive spatial spillovers among private R&D investments. However, our results suggest the existence of competition/substitution effects between national R&D policies.

Keywords: R&D subsidies; Fiscal incentives; Private R&D; Additionality; Dynamic spatial panel model (search for similar items in EconPapers)
JEL-codes: H25 O31 O38 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (78)

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Related works:
Working Paper: Internal and External Effects of R&D Subsidies and Fiscal Incentives: Empirical Evidence Using Spatial Dynamic Panel Models (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:44:y:2015:i:5:p:1065-1079

DOI: 10.1016/j.respol.2014.11.013

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