The Effects of Public Subsidies on R&D Employment: Evidence from OECD Countries

Melbourne Institute Working Paper No. 11/10

Date: July 2010


Russell Thomson
Paul H. Jensen


Existing empirical evidence suggests that public subsidies and fiscal incentives have a positive effect on the amount of private R&D expenditure. However, most studies have failed to address the possibility at least some of this increase may simply reflect the fact that R&D orkers are being paid higher wages. Such an omission may imply that past research has over-estimated the effectiveness of R&D tax concessions. In the absence of widely-available R&D deflators, we consider the impact of a range of public subsidies on the number of fulltime equivalent workers employed in R&D (i.e., researchers) in the business sector. Our findings strongly support the effectiveness of both direct subsidies and fiscal incentives.

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