Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence

72 Pages Posted: 20 Mar 2000 Last revised: 18 Dec 2013

See all articles by Paul A. David

Paul A. David

Stanford University - Department of Economics; University of Oxford - All Souls College; UNU-MERIT (Maastricht)

Bronwyn H. Hall

University of California at Berkeley; National Bureau of Economic Research (NBER); Institute for Fiscal Studies (IFS); Max Planck Institute for Innovation and Competition

Andrew A. Toole

Stanford Institute for Economic Policy Research (SIEPR)

Date Written: October 1999

Abstract

Is public R&D spending complementary and thus "additional" to private R&D spending, or does it substitute for and tend to "crowd out" private R&D? Conflicting answers are given to this question. We survey the body of available economectric evidence accumulated over the past 35 years. A framework for analysis of the problem i is developed to help organize and summarize the findings of econometric studies based on time series and cross-section data from various levels of aggregation (laboratory, firm, industry, country). The findings overall are ambivalent and the existing literature as as a whole is subject to the criticim that the nature of the "experiment(s)" that the investigators envisage is not adequately specified. We conclude by offering suggestions for improving future empirical research on this issue.

Suggested Citation

David, Paul A. and Hall, Bronwyn H. and Toole, Andrew A., Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence (October 1999). NBER Working Paper No. w7373, Available at SSRN: https://ssrn.com/abstract=194612

Paul A. David (Contact Author)

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Bronwyn H. Hall

University of California at Berkeley ( email )

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National Bureau of Economic Research (NBER)

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Andrew A. Toole

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