Estimating the causal effect of R&D subsidies in a pan-European program

Paul Hünermund and Dirk Czarnitzki

Research Policy, 2019, vol. 48, issue 1, 115-124

Abstract: We investigate the effect of Europe's largest multilateral subsidy program for R&D-performing small and medium-sized enterprises. The program applied 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 funding status and allows us to identify the causal effect of public R&D grants on firm growth. In addition, we compare the program's effect under the VCP rule with the standard situation of a Real Common Pot (RCP), in which program authorities allocate a single budget according to uniform project evaluation criteria. Our estimates suggest that R&D grants had no average effect on job creation and sales growth, but treatment effects were heterogeneous and positive for high-quality projects. Under an RCP the program would have created 53% more jobs and 48% higher sales.

Keywords: R&D policy; Causal inference; Virtual Common Pot; Joint Programming Initiative; European Research Area (search for similar items in EconPapers)
JEL-codes: C31 H25 O38 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:48:y:2019:i:1:p:115-124

DOI: 10.1016/j.respol.2018.08.001

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