The Effect of R&D Subsidies on Private R&D

University of Nottingham Research Paper No. 2005/38

31 Pages Posted: 6 Dec 2005

See all articles by Holger Görg

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences; IZA Institute of Labor Economics

Date Written: December 2005

Abstract

This paper investigates the relationship between government support for R&D and R&D expenditure financed privately by firms using a comprehensive plant level data set for the manufacturing sector in the Republic of Ireland. Our empirical strategy combines a non-parametric matching procedure with a difference-in-differences estimator in order to deal with the potential selection problem inherent in the analysis. We find that for domestic plants small and medium sized grants serve to increase private R&D spending, particularly for the former where it can induce R&D spending even beyond the subsidy, while too large a grant may crowd out private financing of R&D. In contrast, evidence for foreign establishments suggests that grant provision causes neither additionality nor crowding out effects of private R&D financing, regardless of the size of the subsidy.

Keywords: research and development (R&D), subsidies, matching, difference-in-differences

JEL Classification: L2, H2, F2, O3

Suggested Citation

Gorg, Holger and Strobl, Eric, The Effect of R&D Subsidies on Private R&D (December 2005). University of Nottingham Research Paper No. 2005/38, Available at SSRN: https://ssrn.com/abstract=864085 or http://dx.doi.org/10.2139/ssrn.864085

Holger Gorg (Contact Author)

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Eric Strobl

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
262
Abstract Views
3,568
Rank
212,409
PlumX Metrics