Government Subsidies to Private Military R&D Investment: DOD's IR&D Policy

Frank Lichtenberg

No 2745, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A relatively obscure defense procurement policy establishes a large subsidy to private military R&D investment. On the surface, it appears that the marginal subsidy to such investment is zero, but this is only true in the short run. Due to DOD's policy of allowable-cost determination, the long-run subsidy is substantial. It is much larger, in fact, than the subsidy provided by the R&D Tax Credit enacted in 1981. I calculate the subsidy by estimating an econometric model using contractor-level data from the Defense Contract Audit Agency. This subsidy may have an important influence on the amount and character of privately financed innovation in the U.S.

Date: 1988-10
Note: PR PE
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Citations: View citations in EconPapers (3)

Published as Defense Economics, Vol. 1, pp. 149-158, (1990).

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Working Paper: GOVERNMENT SUBSIDIES TO PRIVATE MILITARY R&D INVESTMEN: DOD'S IR&D POLICY (1988)
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