Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/140627 
Year of Publication: 
2016
Series/Report no.: 
ZEW Discussion Papers No. 16-039
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
We investigate the effect of Europe's largest multilateral subsidy program for R&D-performing, small and medium-sized enterprises on firm growth. The program was organized under a specific budget allocation rule, referred to as Virtual Common Pot (VCP), which is designed to avoid cross-subsidization between participating countries. This rule creates exogenous variation in treatment status and allows us to identify the local average treatment effect of public R&D grants. In addition, we compare the program's effect under the VCP rule with the standard situation of a Real Common Pot (RCP), where program authorities allocate a single budget according to uniform project evaluation criteria. Our estimates suggest no average effect of grants on firm growth but treatment effects are heterogeneous and increase with project quality. A Real Common Pot would have reduced the cost of policy-induced job creation by 27%. We discuss the implications of our findings for the coordination of national policy programs within the European Research Area.
Subjects: 
Joint Programming Iniatives
R&D Policy
Virtual Common Pot
Instrumental Variable Estimation
European Research Area
JEL: 
O38
H25
C31
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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