Internal and external effects of R&D subsidies and fiscal incentives: Empirical evidence using spatial dynamic panel models
Résumé
Most studies evaluating the macroeconomic effects of financial support policies on business-funded
R&D use econometric methods that do not consider the existence of spatial effects, and generate biased
estimates. In this paper, we discus and address this problem using spatial dynamic panel data methods.
This allow us to provide new insights on the internal (in-country) and external (out-of-country) effects
of both Research and Development (R&D) subsidies and fiscal incentives. We use a database of 25 OECD
countries for the period 1990–2009. In relation to internal effects, for both instruments, we find a nonlinear
relationship between their effect on private R&D and their level (suggesting the possibility of
leveraging and crowding-out effects). We also find a substitution effect between the R&D subsidies and
fiscal incentives implemented within a country. Concerning the spatial component, we find evidence of
positive spatial spillovers among private R&D investments. However, our results suggest the existence
of competition/substitution effects between national R&D policies.