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UK and EU subsidies and private R&D investment: Is there input additionality?

Mehmet Ugur (), Eshref Trushin and Edna Solomon

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the effects of UK and EU subsidies on privately-funded R&D intensity of a sample of 39,730 UK firms. The sample consists of R&D-active firms surveyed in at least one year from 1998-2012. The results are obtained from 4 different estimators, with different degrees of control for selection and time-constant fixed effects: (i) pooled OLS without selection correction; (ii) fixed-effect (within-group) estimation without selection correction; (iii) pooled OLS with selection correction; and (iv) fixed-effect estimation with selection correction. We report that UK subsidies are not associated with additionality in privately -funded R&D intensity in the full sample, and the additionality effect in manufacturing is too small to be conomically significant. In contrast, EU subsidy is associated with an additionality effect of 2% in both samples. Ordered-Heckman estimations of leverage indicate that an increase in UK subsidy intensity (subsidy/total R&D) is not likely to make a difference to private R&D effort in any of the subsidy intensity classes demarcated by 4 quartiles of the intensity distribution. However, an increase in EU subsidy intensity is associated with leverage in subsidy intensity class 3, which corresponds to subsidy intensity values within the 3rd quartile of the distribution.

Keywords: Innovation; R&D; subsidies; additionality (search for similar items in EconPapers)
JEL-codes: C41 D22 L1 O21 O3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-ino and nep-tid
Date: 2015-11-04, Revised 2015-11-16
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Working Paper: UK and EU subsidies and private R&D investment: Is there input additionality? (2015) Downloads
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