Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 832: Subsidizing Away Exports? A Note on R&D-policy towards Multinational Firms

Pehr-Johan Norbäck ()
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Pehr-Johan Norbäck: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: In this paper, I investigate whether instead of strengthening home-based production, government R&D-subsidies can induce R&D-intensive firms to locate production abroad. Investigating firm-level data on Swedish MNEs, however, I find no evidence of such relocation. R&D subsidies rather tend to en courage export production at the expense of foreign production. The theory presented suggests that this is consistent with technology transfer costs, which outweigh trade costs for physical goods.

Keywords: Multinational Firms; R&D; Subsidies; Location; Empirical Analyses

JEL-codes: F23; L13; O33

29 pages, May 19, 2010

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