Sunk costs, extensive R&D subsidies and permanent inducement effects

Pere Arqué-Castells () and Pierre Mohnen
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Pere Arqué-Castells: Universitat Autònoma de Barcelona & Institut d’Economia de Barcelona, Facultat d'Economia i Empresa, Edifici B - Campus de la Universitat Autònoma de Barcelona, 08193, Bellaterra - Barcelona, Spain

No XREAP2012-10, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

Abstract: We study whether there is scope for using subsidies to smooth out barriers to R&D performance and expand the share of R&D firms in Spain. We consider a dynamic model with sunk entry costs in which firms’ optimal participation strategy is defined in terms of two subsidy thresholds that characterise entry and continuation. We compute the subsidy thresholds from the estimates of a dynamic panel data type-2 tobit model for an unbalanced panel of about 2,000 Spanish manufacturing firms. The results suggest that “extensive” subsidies are a feasible and efficient tool for expanding the share of R&D firms.

Keywords: R&D; Persistence; Subsidies; Dynamic models (search for similar items in EconPapers)
JEL-codes: C1 D2 H2 O2 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012-05, Revised 2012-05
New Economics Papers: this item is included in nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2012-10.pdf First version, 2012 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2012-10.pdf Revised version, 2012 (application/pdf)

Related works:
Journal Article: Sunk Costs, Extensive R&D Subsidies and Permanent Inducement Effects (2015)
Working Paper: Sunk costs, extensive R&D subsidies and permanent inducement effects (2012)
Working Paper: Sunk costs, extensive R&D subsidies and permanent inducement effects (2012)
Working Paper: Sunk costs, extensive R&D subsidies and permanent inducement effects (2012)
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