How to allocate R&D (and other) subsidies : an experimentally tested policy recommendation

• This paper evaluates the typically applied rules for awarding R&D subsidies. We identify two sources of inefficiency: the selection based on a ranking of individual projects, rather than complete allocations, and the failure to induce competition among applicants in order to extract and use information about the necessary funding. In order to correct these inefficiencies we propose mechanisms that include some form of an auction in which applicants bid for subsidies. Our proposals are tested in a simulation and in controlled lab experiments. The results suggest that adopting our proposals may considerably improve the allocation.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Research

Subsidies

Experimental economics

Publication and Content Type

ref (subject category)

art (subject category)