Do R & D subsidies stimulate or displace private R & D? Evidence from Israel

Saul Lach*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

373 Scopus citations

Abstract

In evaluating the effect of an R & D subsidy we need to know what the subsidized firm would have spent on R & D had it not received the subsidy. Using data on Israeli manufacturing firms in the 1990s we find evidence suggesting that the R & D subsidies granted by the Ministry of Industry and Trade greatly stimulated company financed R & D expenditures for small firms but had a negative effect on the R & D of large firms, although not statistically significant. One subsidized New Israeli Shekel (NIS) induces 11 additional NIS of own R & D for the small firms. However, because most subsidies go to the large firms a subsidy of one NIS generates, on average, a statistically insignificant 0.23 additional NIS of company financed R & D.

Original languageAmerican English
Pages (from-to)369-390
Number of pages22
JournalJournal of Industrial Economics
Volume50
Issue number4
DOIs
StatePublished - Dec 2002

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