The Effects of Public Subsidies on R&D Employment: Evidence from OECD Countries

36 Pages Posted: 16 Jan 2011

See all articles by Russell K. Thomson

Russell K. Thomson

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Paul H. Jensen

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Date Written: July 13, 2010

Abstract

Existing empirical evidence suggests that public subsidies and fiscal incentives have a positive effect on the amount of private R&D expenditure. However, most studies have failed to address the possibility at least some of this increase may simply reflect the fact that R&D workers are being paid higher wages. Such an omission may imply that past research has over-estimated the effectiveness of R&D tax concessions. In the absence of widely-available R&D deflators, we consider the impact of a range of public subsidies on the number of full-time equivalent workers employed in R&D (i.e., researchers) in the business sector. Our findings strongly support the effectiveness of both direct subsidies and fiscal incentives.

Keywords: Innovation Policy, R&D Tax Credits, R&D Investment

JEL Classification: O38, H25

Suggested Citation

Thomson, Russell K. and Jensen, Paul H., The Effects of Public Subsidies on R&D Employment: Evidence from OECD Countries (July 13, 2010). Available at SSRN: https://ssrn.com/abstract=1740163 or http://dx.doi.org/10.2139/ssrn.1740163

Russell K. Thomson

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Paul H. Jensen (Contact Author)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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