Evaluating the Impacts of Subsidies on Innovation Activities in Germany

22 Pages Posted: 29 Dec 2005

See all articles by Reinhard Hujer

Reinhard Hujer

University of Frankfurt; IZA Institute of Labor Economics

Dubravko Radic

University of Frankfurt - Economics and Business Administration Area

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Abstract

Innovations are a key factor to ensure the competitiveness of establishments as well as to enhance the growth and wealth of nations. But more than any other economic activity, decisions about innovations are plagued by failures of the market mechanism. As a response, public instruments have been implemented to stimulate private innovation activities. The effectiveness of these measures, however, is ambiguous and calls for an empirical evaluation. In this paper we make use of the IAB Establishment Panel and apply various microeconometric methods to estimate the effect of public measures on innovation activities of German establishments. We find that neglecting sample selection due to observable as well as to unobservable characteristics leads to an overestimation of the treatment effect and that there are considerable differences with regard to size class and between West and East German establishments.

Suggested Citation

Hujer, Reinhard and Radic, Dubravko, Evaluating the Impacts of Subsidies on Innovation Activities in Germany. Scottish Journal of Political Economy, Vol. 52, No. 4, pp. 565-586, September 2005. Available at SSRN: https://ssrn.com/abstract=857816 or http://dx.doi.org/10.1111/j.1467-9485.2005.00356.x

Reinhard Hujer (Contact Author)

University of Frankfurt ( email )

Institute for Statistics and Econometrics
60054 Frankfurt
Germany
+49 798 23673 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Dubravko Radic

University of Frankfurt - Economics and Business Administration Area ( email )

Mertonstrasse 17-25
Frankfurt am Main, D-60325
Germany
+49 69 798 28188 (Phone)
+49 69 798 23673 (Fax)

HOME PAGE: http://www.wiwi.uni-frankfurt.de/Professoren/hujer/dubi.html

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