The impact of public R&D expenditure on business R&D*

This paper attempts to quantify the aggregate net effect of government funding on business R Direct funding as well as tax incentives are more effective when they are stable over time: firms do not invest in additional R Direct government funding and R The stimulating effect of government funding varies with respect to its generosity: it increases up to a certain threshold (about 10% of business R Defence research performed in public laboratories and universities crowds out private R Civilian public research is neutral for business R&D. * We thank the participants to various seminars, including the OECD Committee for Scientific and Technology Policy and the NBER 2000 Summer Institute on Productivity for helpful comments and suggestions. All opinions expressed in this article are those of the authors and do not reflect necessarily the views of the OECD or Universite Libre de Bruxelles.