Estimating the local average treatment effect of R&D subsidies in a pan-European program


Hünermund, Paul ; Czarnitzki, Dirk


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URL: https://ub-madoc.bib.uni-mannheim.de/41106
URN: urn:nbn:de:bsz:180-madoc-411061
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: ZEW Discussion Papers
Volume: 16-039
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: O38 , H25 , C31,
Keywords (English): Joint programming iniatives , R&D policy , virtual common pot , instrumental variable estimation , European research area
Abstract: We investigate the effect of Europe's largest multilateral subsidy program for R&D-performing, small and medium-sized enterprises on firm growth. The program was organized under a specific budget allocation rule, referred to as Virtual Common Pot (VCP), which is designed to avoid cross-subsidization between participating countries. This rule creates exogenous variation in treatment status and allows us to identify the local average treatment effect of public R&D grants. In addition, we compare the program's effect under the VCP rule with the standard situation of a Real Common Pot (RCP), where program authorities allocate a single budget according to uniform project evaluation criteria. Our estimates suggest no average effect of grants on firm growth but treatment effects are heterogeneous and increase with project quality. A Real Common Pot would have reduced the cost of policyinduced job creation by 27%. We discuss the implications of our findings for the coordination of national policy programs within the European Research Area.

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Hünermund, Paul ; Czarnitzki, Dirk (2016) Estimating the local average treatment effect of R&D subsidies in a pan-European program. Open Access ZEW Discussion Papers Mannheim 16-039 [Working paper]
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