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  5. Are Complementary Policies Substitutes? Evidence from R&D Subsidies in the UK

蝌蚪网 Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

Are Complementary Policies Substitutes? Evidence from R&D Subsidies in the UK

  • Jacquelyn Pless
蝌蚪网 Journal: Economic Policy (Forthcoming)

Abstract

This paper studies whether grants and tax incentives for private R&D are complements or substitutes. I use multiple quasi-experimental research designs to examine firms in the United Kingdom and find that increasing tax credit generosity substantially enhances the effect of grant funding on R&D for small firms, suggesting that the instruments are complements. Financial constraints are likely at play. The effects are strongest for firms that appear constrained, and the combination of policies increases R&D 鈥渆ntry.鈥� Furthermore, I find that the instruments are substitutes for larger firms, which are usually less constrained. Some alternative explanations can be ruled out.

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