The "Sugar Rush" from Innovation Subsidies. A Robust Political Economy Perspective

Anders Gustafsson (), Andreas Stephan, Nils Karlson and Alice Hallman
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Anders Gustafsson: The Ratio institute and Jönköping School of Economics, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden, http://ratio.se/medarbetare/anders-gustafsson/
Alice Hallman: The Ratio institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Authors registered in the RePEc Author Service: Anders Kärnä

No 270, Ratio Working Papers from The Ratio Institute

Abstract: The governments of most advanced countries offer some type of financial subsidy to encourage firm innovation and productivity. This paper analyzes the effects of innovation subsidies using a unique Swedish database that contains firm level data for the period 1997-2011, specifically information on firm subsidies over a broad range of programs. Applying causal treatment effect analysis based on matching and a diff-in-diff approach combined with a qualitative case study of Swedish innovation subsidy programs, we test whether such subsidies have positive effects on firm performance. Our results indicate a lack of positive performance effects in the long run for the majority of firms, albeit there are positive short-run effects on human capital investments and also positive short-term productivity effects for the smallest firms. These findings are interpreted from a robust political economy perspective that reveals that the problems of acquiring correct information and designing appropriate incentives are so complex that the absence of significant positive long-run effects on firm performance for the majority of firms is not surprising.

Keywords: Innovation subsidies; market failures; causal treatment effect evaluation; firm performance; CEM; robust political economy (search for similar items in EconPapers)
JEL-codes: H25 O38 P16 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-04-25
New Economics Papers: this item is included in nep-eff, nep-ino, nep-pol, nep-reg and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: The “sugar rush” from innovation subsidies: a robust political economy perspective (2016)
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