Sunk costs, extensive R&D subsidies and permanent inducement effects

Arqué-Castells, Pere and Mohnen, Pierre (2012). Sunk costs, extensive R&D subsidies and permanent inducement effects. UNU-MERIT.

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  • Author Arqué-Castells, Pere
    Mohnen, Pierre
    Title Sunk costs, extensive R&D subsidies and permanent inducement effects
    Publication Date 2012
    Publisher UNU-MERIT
    Abstract 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 characterize 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.
    Keyword R&D
    Persistence
    Subsidies
    Dynamic models
    JEL H2
    O2
    C1
    D2
    Copyright Holder UNU-MERIT
    Copyright Year 2012
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    Created: Wed, 11 Dec 2013, 17:06:00 JST