Public Economics Gone Wild: Lessons from Venture Capital
36 Pages Posted: 7 Nov 2013
Date Written: November 4, 2013
A recent article in the Journal of Public Economics has asserted, among other things, that government venture capital funds in Europe have crowded out private venture capital. I explain that the findings in that paper are based on empirical measures that are completely flawed. Moreover, I show with data spanning 13 countries and the years 1989-2011 that government venture capital funds in Europe have not crowded out private venture capital investment. Finally, I draw implications for studying venture capital and public policy for other countries such as India and China.
Keywords: Venture capital; Public Policy; Government sponsorship; Tax; Crowding out
JEL Classification: G24, G28, G32, G38, K22
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