Public Funding of R&D and Growth: Firm-Level Evidence from Finland

Abstract

This study considers employment and productivity growth generated by the public funding of R&D using linked employer–employee data in Finland. Public subsidies, instrumented by available public R&D funding in the industry/region, have a positive effect on productivity growth in small and medium-sized firms and in firms close to the top of their field in productivity.

Keywords:

• R&D
• Public expenditures
• Endogenous growth
• Linked employer–employee data

Acknowledgements

Financial support by the Proact programme initiated by the Finnish Funding Agency for Technology and Innovation, Tekes and Ministry of Trade and by the Ministry of Labour is gratefully acknowledged. I would like to thank Jyrki Ali-Yrkkö for helpful comments.

Notes

¹Two-stage least squares in models that have non-linear variable have been discussed in Green (2003) in section 15.5.6.

Additional information

Notes on contributors

H. Piekkola

E-mail: [email protected]