Supported by the Luxembourg National Research Fund (FNR) 17539924
Abstract
We investigate the misappropriation of R&D subsidies and evaluate its consequences for policy effectiveness. Using Chinese firm-level data for 2001-2011, we identify that 42% of grantees misused R&D subsidies, accounting for 53% of total R&D subsidies. Misappropriation leads to a substantial loss of the causal impact of R&D subsidies, as measured by the difference of the intention-to-treat effect and complier average causal effect. Results show that R&D expenditures could have been stimulated beyond the subsidy amount (additionality), but noncompliance has resulted in medium-level partial crowding out. Overall, misappropriation has reduced the effectiveness of China’s R&D policy by more than half.
About Philipp Boeing
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