R&D and Subsidy Policy with Imperfect Project Classification

Thomas Gehrig; Rune Stenbacka

doi:10.1016/j.econlet.2022.110966

R&D and Subsidy Policy with Imperfect Project Classification

Thomas Gehrig, Rune Stenbacka

Institut für Finanzwirtschaft

Veröffentlichungen: Beitrag in Fachzeitschrift › Artikel › Peer Reviewed

Abstract

We characterize optimal subsidies for firms facing limitations in their ability to correctly classify risky R&D projects. We demonstrate that the optimal subsidy is an increasing function of firms’ ability to reduce type-I errors in accepting projects with a success potential, and a decreasing function in their type-II error of adopting projects with no success potential. Moreover, the optimal subsidy is decreasing in the informational advantage regarding the assessment of project viability of private firms relative to the government.

Originalsprache	Englisch
Aufsatznummer	110966
Fachzeitschrift	Economics Letters
Jahrgang	222
Frühes Online-Datum	Jan. 2023
DOIs	https://doi.org/10.1016/j.econlet.2022.110966
Publikationsstatus	Veröffentlicht - Jan. 2023

ÖFOS 2012

502013 Industrieökonomik
502014 Innovationsforschung

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FiWi

UN SDGs

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AB - We characterize optimal subsidies for firms facing limitations in their ability to correctly classify risky R&D projects. We demonstrate that the optimal subsidy is an increasing function of firms’ ability to reduce type-I errors in accepting projects with a success potential, and a decreasing function in their type-II error of adopting projects with no success potential. Moreover, the optimal subsidy is decreasing in the informational advantage regarding the assessment of project viability of private firms relative to the government.

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DO - 10.1016/j.econlet.2022.110966

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R&D and Subsidy Policy with Imperfect Project Classification

Abstract

ÖFOS 2012

Schlagwörter

UN SDGs

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