Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector

Dirk Czarnitzki and Andreas Fier

No 02-04, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper analyses the impact of public innovation subsidies on private innovation expenditure. In the empirical economic literature there is still no common support for the hypothesis of either a complementary or a substitutive relationship between public funding and private investment. We investigate whether firms of the German service sector increase their innovation effort when participating in public policy schemes. Cross-sectional data at the firm level are used to estimate the effect of subsidization. Applying a non-parametric matching approach we find evidence that the hypothesis of complete crowding-out effects between public and private funds can be rejected.

Keywords: Innovation; Public Innovation Subsidies; Service Sector; Policy Evaluation (search for similar items in EconPapers)
JEL-codes: C20 C24 H32 O31 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (100)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:893

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