Seminar  |  05/19/2021 | 3:00 p.m.  –  4:15 p.m.

Innovation & Entrepreneurship Seminar: Welfare Effects of R&D Policies

Otto Toivanen (Aalto University)

Seminars currently take place in online format (see seminar page).

We conduct a welfare analysis of R&D subsidies and tax credits incorporating externalities, limited R&D participation and financial market imperfections, estimating the model using Finnish R&D project level data. Firms with no immediate R&D history face more severe financial market imperfections than firms with a history of R&D. The intensive, not the extensive margin of R&D is important for policy. Financial market imperfections play no role in determining R&D. Tax credits and subsidies increase R&D investments compared to laissez-faire but less than first best. Neither R&D support policy improves welfare. (Joint work with Tuomas Takalo, Bank of Finland, and Tanja Tanayama, EIB) 

Contact: Rainer Widmann