Estimating the Benefits of Targeted R&D Subsidies

Tuomas Takalo, Tanja Tanayama and Otto Toivanen

The Review of Economics and Statistics, 2013, vol. 95, issue 1, 255-272

Abstract: We study the expected welfare effects of targeted R&D subsidies using project-level data from Finland. We model the application and R&D investment decisions of firms and the subsidy-granting decision of the public agency in charge of the program. Our model and institutional environment allow us to identify different benefits and costs of the R&D subsidy program. We find that expected effects of subsidies are very heterogeneous and estimated application costs low on average. The social rate of return on targeted subsidies is 30% to 50%, but spillover effects of subsidies are smaller than effects on firm profits. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: applications; financing of innovations; R&D investments; selection; subsidies; treatment program; welfare (search for similar items in EconPapers)
JEL-codes: D04 G38 H25 L59 O31 O38 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (98)

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