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Internal and External Effects of R&D Subsidies and Fiscal Incentives: Empirical Evidence Using Spatial Dynamic Panel Models

Author

Listed:
  • Benjamin Montmartin

    (GREDEG CNRS
    University of Nice Sophia Antipolis, France)

  • Marcos Herrera

    (CONICET - IELDE
    National University of Salta, Argentina)

Abstract
Most studies evaluating the macroeconomic effects of financial support policies on business-funded R&D use econometric methods that do not consider the existence of spatial effects, and generate biased estimates. In this paper, we discus and address this problem using spatial dynamic panel data methods. This allow us to provide new insights on the internal (in-country) and external (out-of-country) effects of both Research and Development (R&D) subsidies and fiscal incentives. We use a database of 25 OECD countries for the period 1990-2009. In relation to internal effects, for both instruments, we find a non-linear relationship between their effect on private R&D and their level (suggesting the possibility of leveraging and crowding-out effects). We also find a substitution effect between the R&D subsidies and fiscal incentives implemented within a country. Concerning the spatial component, we find evidence of positive spatial spillovers among private R&D investments. However, our results suggest the existence of competition/substitution effects between national R&D policies.

Suggested Citation

  • Benjamin Montmartin & Marcos Herrera, 2014. "Internal and External Effects of R&D Subsidies and Fiscal Incentives: Empirical Evidence Using Spatial Dynamic Panel Models," GREDEG Working Papers 2014-09, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2014-09
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    References listed on IDEAS

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    More about this item

    Keywords

    Direct and Indirect support; Business-funded R&D; Complementarity; Dynamic spatial panel data;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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