Open Access
Interaction in R&D and the case-by-case subsidy rule
Loading...
Files
ECO_2010_38.pdf (195.3 KB)
EUI ECO 2010/38
License
Access Rights
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
1725-6704
Issue Date
Type of Publication
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
EUI ECO; 2010/38
Cite
HORAN, David, Interaction in R&D and the case-by-case subsidy rule, EUI ECO, 2010/38 - https://hdl.handle.net/1814/15210
Abstract
This paper studies the performance of government subsidy programs which fund business R&D projects. A commonly used criterion for distributing funding is the case-by-case (CbC) rule. Under the rule, project funding is decided based on the gap between a project’s social and private return. This paper finds that in the presence of pervasive complementarity in R&D activities CbC funding is socially excessive. On the other hand, in the presence of pervasive substitutability in R&D activities CbC funding is socially insufficient. Since the situation can differ greatly from one industry to the next, these findings suggest governments may be over-funding research in some industries at the expense of research in other under-funded industries.