Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence

September 1999 <p> Prepared for a special issue of Research Policy on technology policy issues, forthcoming in the year 2000 under the guest-editorship of Albert N. Link. <p> Is public R&D spending complementary and thus additional to private R&D spending, or does it substitute for and tend to crowd out private R&D? Conflicting answers are given to this question. We survey the body of available econometric evidence accumulated over the past 35 years. A framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross-section data from various levels of aggregation (laboratory, firm, industry, country). The findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment(s) that the investigators envisage is not adequately specified. We conclude by offering suggestions for improving future empirical research on this issue. <p> Keywords: R&D, fiscal policy, government subsidy, technology policy <p> JEL codes: O30, O38, H40, H54, L10