Estimating the benefits of targeted R&D subsidies

Tuomas Takalo, Tanja Tanayama, Otto Toivanen

Research output: Contribution to journalArticleScientificpeer-review

90 Citations (Scopus)


We study the expected welfare effects of targeted R&D subsidies using project-level data from Finland. We model the application and R&D investment decisions of firms and the subsidy-granting decision of the public agency in charge of the program. Our model and institutional environment allow us to identify different benefits and costs of the R&D subsidy program. We find that expected effects of subsidies are very heterogeneous and estimated application costs low on average. The social rate of return on targeted subsidies is 30% to 50%, but spillover effects of subsidies are smaller than effects on firm profits.
Original languageEnglish
Peer-reviewed scientific journalReview of Economics and Statistics
Issue number1
Pages (from-to)255-272
Number of pages18
Publication statusPublished - 01.03.2013
MoE publication typeA1 Journal article - refereed


  • 511 Economics
  • Mathematical models of economics
  • Subsidies
  • Federal aid to research
  • Externalities (Economics)
  • Research & development -- Economic aspects
  • Institutional environment
  • Finland


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