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Subsidising Innovation over the Business Cycle

Isabel Busom () and Jorge Vélez-Ospina ()
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Jorge Vélez-Ospina: Science Policy Research Unit (SPRU), University of Sussex.

Authors registered in the RePEc Author Service: Jorge Andres Velez-Ospina

SPRU Working Paper Series from SPRU - Science Policy Research Unit, University of Sussex Business School

Abstract: We investigate whether the impact of direct support for business investment in R&D and innovation varies over the business cycle. We study whether firms that obtain public support in a recession differ from firms that obtain it during expansions; whether the impact of support is smaller in recessions than in expansions, and whether effects vary with the treatment pattern. Using firm-level data from Spain during the period 2005 to 2014, we combine propensity score matching and difference-in-differences methods to estimate firms’ response. We find that (i) while the impact of support on monetary investment in innovation is pro-cyclical, it is counter-cyclical in terms of the employee-time allocation to innovation activities; (ii) the additionality of a one-year treatment is smaller than that of a longer treatment. Direct public support may have thus prevented a decline of the firms’ knowledge capital during the recessi

Keywords: — R&D subsidies; policy evaluation; business cycle; additionali (search for similar items in EconPapers)
JEL-codes: O25 O38 C14 C21 D22 L29 L53 H (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-ino, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:sru:ssewps:2020-09

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