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Sunk costs, extensive R&D subsidies and permanent inducement effects
Arqué Castells, Pere; Mohnen, Pierre A.
Xarxa de Referència en Economia Aplicada (XREAP)
We study whether there is scope for using subsidies to smooth out barriers to R&D performance and expand the share of R&D firms in Spain. We consider a dynamic model with sunk entry costs in which firms’ optimal participation strategy is defined in terms of two subsidy thresholds that characterise entry and continuation. We compute the subsidy thresholds from the estimates of a dynamic panel data type-2 tobit model for an unbalanced panel of about 2,000 Spanish manufacturing firms. The results suggest that “extensive” subsidies are a feasible and efficient tool for expanding the share of R&D firms.
332 - Economia regional i territorial. Economia del sòl i de la vivenda
Recerca industrial
Industrial research
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44 p.
Working Paper
Xarxa de Referència en Economia Aplicada (XREAP)

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