Date: 2010
Type: Working Paper
Interaction in R&D and the case-by-case subsidy rule
Working Paper, EUI ECO, 2010/38
HORAN, David, Interaction in R&D and the case-by-case subsidy rule, EUI ECO, 2010/38 - https://hdl.handle.net/1814/15210
Retrieved from Cadmus, EUI Research Repository
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.
Cadmus permanent link: https://hdl.handle.net/1814/15210
ISSN: 1725-6704
Series/Number: EUI ECO; 2010/38
Publisher: European University Institute
Keyword(s): R&D subsidies Interaction in R&D Case-by-case subsidy Rule Welfare H40 O31 O38 O30