Do subsidies to commercial R&amp;D reduce market failures? Microeconometric evaluation studies

Klette, Tor Jakob; Møen, Jarle; Griliches, Zvi

doi:10.1016/s0048-7333(99)00086-4

Cited by 542 publications

(282 citation statements)

References 54 publications

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“…Klette et al (2000) give a survey of microeconometric studies focusing on different effects like crowding out, growth, patenting etc. David et al (2000) provide a survey focusing on studies analyzing R&D input measures on different aggregation levels.…”

Section: Introductionmentioning

confidence: 99%

R&D and subsidies at the firm level: an application of parametric and semiparametric two‐step selection models

Hussinger

2008

J of Applied Econometrics

311

172

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Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0363.pdf Non-Technical SummaryDo public R&D subsidies stimulate or simply crowd out private investment? The economic literature concerning external effects indicates that innovations suffer from market failure. Innovation projects with high social returns may not be implemented, because the induced private benefits do not exceed the private costs. The rationale of public R&D funding is to reduce private costs and therefore raise the investment in the R&D projects and the number of conducted R&D projects. However there is an incentive for all firms to apply for public funding, even for those who could perform their innovation activities using their own funds. Thus, the impact of the public R&D funding is questionable.The focus of this paper is on the direct funding of R&D projects in the German manufacturing sector granted by the Federal Ministry of Education and Research (BMBF). This study applies parametric and semiparametric two-step selection models. Selection models treat the receipt of public R&D funding as endogeneous and include a selection correction for this non-random selection process, in the structural equation on the firms' R&D expenditure. In a first step, firms' probability of receiving public R&D funding is estimated and in a second step, the effect of the public funds on firms' R&D expenditure is considered. Selection models control for unobservable characteristics entering both the selection and the structural part of the model.The parametric two-step Heckman model serves as a benchmark. Alternatively, a dummy variables estimator (Cosslett, 1991), a series estimator (Newey, 1999) and Robinson's (1988) estimator as a partial linear model are applied. Semiparametric estimators identify only the slope parameters of the structural equation. Hence, an additional estimator for the intercept is needed to identify the treatment effects. This study uses the intercept estimators developed by Heckman (1990) and Andrews and Schafgans (1998).In line with previous studies, the finding is that R&D subsidies have a positive effect on firms' R&D expenditure for all estimated models. However, it also outlines that the level of the "average treatment effect on the treated" varies with the different assumptions of the applied selection model. November 2003Abstract This paper analyzes the effects of public R&D subsidies on R&D expenditure in the German manufacturing sector. The focus is on the question whether public R&D funding stim...

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Section: Introductionmentioning

confidence: 99%

R&D and subsidies at the firm level: an application of parametric and semiparametric two‐step selection models

Hussinger

2008

J of Applied Econometrics

311

172

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“…In Japan flossen die größten Anteile der Mittelzuwächse in die Finanzierung "nicht- Ob und inwieweit eine Subvention zu einer Wohlfahrtserhöhung beiträgt, oder es zu einem crowding out Effekt zwischen privaten und öffentlichen Geldern kommt, ist seit einigen Jahren eine zentrale Fragestellungen bei Evaluierungen öffentlicher F&E-Förderung. In Klette et al (2000) und David et al (2000) finden sich jeweils ein Überblick zu der Literatur ökonometrischer Analysen zu den Auswirkungen von F&E-Förderung. Für Österreich wurde im Rahmen der Evaluierung des FFF der Frage nach der Hebelwirkung der öffentlichen Förderung breiter Raum gewidmet (siehe Schibany et al 2004b).…”

Section: Die Basis Und Konzentration Von Fande In öSterreichunclassified

Instrumente der Technologieförderung und ihr Mix

Schibany¹,

Jörg²,

Nones³

2005

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“…One likely explanation for the lack of clear evidence is econometric problems related to selection, see David, Hall and Toole (2000), Klette, Møen and Griliches (2000), Jaffe (2002) and Cerulli (2010) for surveys. Wallsten (2000) explains the basic problem in one sentence: "Regressing some measure of innovation on the subsidy can establish a correlation between grants and R&D, but it cannot determine whether grants increase firm R&D or whether firms that do more R&D receive more grants."…”

Section: Introductionmentioning

confidence: 99%

“…Firm fixed effects will pick up aspects such as R&D experience, networks and experience with the application process and technological opportunities in the firm's product group. As pointed out by Klette et al (2000), however, there may be unobserved transitory effects that invalidates fixed effects estimation in this context. Firms are more likely to apply for subsidies when they have particularly good projects and a particularly good chance of receiving subsidies.…”

Section: Introductionmentioning

confidence: 99%

Estimating the additionality of R&D subsidies using proposal evaluation data to control for research intentions

2014

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Empirical examination of whether R&D subsidies crowd out private investments has been hampered by selection problems. A particular worry is that project quality and research intentions may be correlated with the likelihood of receiving subsidies. Using proposal evaluation data to control for research intentions, we do not find strong evidence suggesting that this type of selection creates a severe bias. Proposal evaluation grades strongly predict R&D investments and reduce selection bias in cross-sectional regressions, but there is limited variation in grades within firms over time. Hence, in our sample, unobserved project quality is largely absorbed by firm fixed effects. Our best estimate of the short-run additionality of R&D subsidies is 1.15, i.e., a one-unit increase in subsidy increases total R&D expenditure in the recipient firm by somewhat more than a unit. We demonstrate, however, that there is measurement error in the subsidy variable. Additionality is therefore likely to be underestimated. JEL CLASSIFICATION: O38, O32, L53, H25, H32

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Do subsidies to commercial R&D reduce market failures? Microeconometric evaluation studies

Cited by 542 publications

References 54 publications

R&D and subsidies at the firm level: an application of parametric and semiparametric two‐step selection models

R&D and subsidies at the firm level: an application of parametric and semiparametric two‐step selection models

Instrumente der Technologieförderung und ihr Mix

Estimating the additionality of R&D subsidies using proposal evaluation data to control for research intentions

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