Research Discussion Papers, Bank of Finland
No 7/2008:
Evaluating innovation policy: a structural treatment effect model of R&D subsidies
Tuomas Takalo ()
, Tanja Tanayama ()
and Otto Toivanen ()
Abstract: This paper studies the welfare effects of R&D subsidies.
We develop a model of continuous optimal treatment with outcome
heterogeneity where the treatment outcome depends on applicant investment.
The model takes into account heterogeneous application costs and identifies
the treatment effect on the public agency running the programme. Under the
assumption of a welfare-maximizing agency, we identify general equilibrium
treatment effects. Applyiing our model to R&D project-level data we find
substantial treatment effect heterogeneity. Agency-specific treatment
effects are smaller than private treatment effects. We find that the rate
of return on subsidies for the agency is 30–50%.
Keywords: applications; effort; investment; R&D; selection; subsidies; treatment programme; treatment effects; welfare; (follow links to similar papers)
JEL-Codes: C31; L53; O31; O38; (follow links to similar papers)
59 pages, March 11, 2008
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- This paper is published as:
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Takalo, Tuomas, Tanja Tanayama and Otto Toivanen, (2013), 'Evaluating innovation policy: a structural treatment effect model of R&D subsidies', Review of Economics and Statistics, Vol. 95, March, No. 1, pages 255-272
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