The effects of public supports on business R&D: firm-level evidence across EU countries

David Aristei, Alessandro Sterlacchini () and Francesco Venturini ()

MPRA Paper from University Library of Munich, Germany

Abstract: Using homogenous firm-level data for the largest Member States of the EU over the period 2007-2009, we test whether manufacturing firms receiving R&D public supports (subsidies and/or tax incentives) spent more on R&D. The analysis is performed by means of both non-parametric (Propensity Score Matching) and parametric estimations (OLS and mixed-model system, with the latter accounting for the possible endogeneity of public supports). The hypothesis of full crowding-out of private with public funds (i.e. public support reduced privately-funded R&D expenses) is rejected for all countries, with the partial exception of Spain. However, we do not find evidence for the hypothesis of additionality of R&D subsidies (i.e. direct funding did not raise private R&D). These findings contrast with earlier works and might be due to the period under assessment, which covers the financial turmoil and the subsequent economic downturn. A focused analysis on France suggests that R&D tax credits exerted a positive impact on R&D. Overall, our findings indicate that, albeit they were not expansive, public supports avoided the reduction of firm R&D at the outset of financial crisis.

Keywords: R&D; subsidies; tax incentives; policy evaluation; EU manufacturing firms (search for similar items in EconPapers)
JEL-codes: C21 D04 O32 O38 (search for similar items in EconPapers)
Date: 2015-05-26
New Economics Papers: this item is included in nep-cse, nep-eur, nep-ino, nep-knm, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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