This paper analyzes the employment effects of publicly
subsidized R&D. The basic, very stylized line of
reasoning underlying this question is that public
subsidies for R&D foster innovation; innovation, in turn,
causes firm growth, which, in turn, also increases the
firms' labor demand.
The nexus of publicly subsidized R&D and the labor demand
effect is usually treated in two distinct steps. The
first step studies the direct output of the research
activity and asks whether publicly subsidized R&D
programs increase the companies' rate of innovation. The
second step derives how the outcomes of the research
activity (innovations, patents, etc.) influence the
firms' labor demand. In this research we merge both
steps. We directly analyze whether companies that
received public subsidies show a differential labor
demand subsequent to being subsidized.
We test the hypothesis using data on a panel of Finnish
firms consisting of subsidized as well as of not
subsidized firms. To eliminate the selection bias and to
estimate the impact of the subsidies we use a
kernel-based matching and a diffs-in-diffs estimation.
The results of this study support the hypothesis that
public subsidies have a positive impact on companies'
innovative output. They also establish an empirical link
between the funding and the companies' subsequent labor
demand. Public subsidies for innovation are found to have
a positive influence on the companies' employment.
|Place of Publication||Espoo|
|Publisher||VTT Technical Research Centre of Finland|
|Number of pages||27|
|Publication status||Published - 2004|
|MoE publication type||Not Eligible|
|Series||VTT Working Papers|
- R&D subsidies
- labor demand
- treatment effect
- conditional difference in difference